WASHINGTON — The IRS is still too slow in processing amended tax returns, answering taxpayer calls and resolving identity theft cases, according to an independent watchdog within the agency.
The federal tax collector must improve its processing and correspondence issues with taxpayers despite a huge boost in funding from the Democrats’ Inflation Reduction Act, according to an annual report Wednesday to Congress from Erin M. Collins, who heads the organization that is designated to protect taxpayers’ rights under the Taxpayer Bill of Rights.
The report serves as a reality check of sorts, as IRS leaders say the funding increase will deliver major improvements in service to taxpayers. Republican critics, meanwhile, are trying to claw back some of the money and portray the organization as an overzealous enforcer of the tax code.
The IRS is experiencing “extraordinary delays” in helping victims of identity theft; it takes almost 19 months to resolve self-reported cases, which the report calls “unreasonable” as a delay in receiving a refund could exacerbate financial problems.
In addition, the backlog of unprocessed amended returns quadrupled from 500,000 in 2019 to 1.9 million in October last year. And according to the report, taxpayer correspondence cases more than doubled over the same period, from 1.9 million to 4.3 million.
The report also says that IRS employees answered only 35% of all calls received, despite the agency claiming 85%. The IRS does not include calls where the taxpayer hangs up before being placed in a queue.
And while the agency is busy hiring — thousands of employees since 2022 — the new employees need proper training, the report said. The 2023 Federal Employee Viewpoint Survey shows that a quarter of IRS employees believe they do not receive enough training to perform their jobs properly.
“It is critical that the IRS makes comprehensive training a priority and ensures new hires receive adequate training before being assigned to tasks that impact taxpayers,” Collins said.
The federal tax collection agency originally received an $80 billion capital injection under the Inflation Reduction Act, but that money is vulnerable to potential budget cuts.
Last year’s debt ceiling and spending deal between Republicans and the White House resulted in a $1.4 billion withdrawal from the agency and a separate agreement to take $20 billion from the IRS over the next two years and divert that money to other non-defense programs.
Collins said in the report that she believes some of the law’s funding provided for enforcement should be spent on improving taxpayer services “to enable the IRS to implement the changes needed to transform the taxpayer experience and modernize its IT systems in the coming years. .”
“I encourage the IRS to place greater emphasis on reducing the paper processing backlog by 2024,” Collins said in her report.
The report comes shortly after the IRS announced that the 2024 filing season will begin on January 29. Agency leaders say better customer service and technical options will be available to taxpayers and most refunds should be issued within 21 days.
The agency has extricated itself from decades of underfunding. By the end of the 2021 filing season, it was dealing with a backlog of more than 35 million tax returns that required manual data entry or employee review.
Last April, IRS Commissioner Daniel Werfel announced details of IRS plans to use IRA money for improved operations, promising to invest in new technology, hire more customer service representatives and expand the agency’s ability to serve taxpayers with high ability to control.
Additional money for the IRS has been politically controversial since 2013, when it emerged that the agency had scrutinized political groups that applied for tax exemptions during the Obama administration. A report from the Treasury Department’s internal watchdog found that both conservative and liberal groups had been singled out for close scrutiny