The IRS is assigning more workers to deal with a huge backlog of tax returns

The Internal Revenue Service, faced with a backlog of millions of tax returns from last year, is reassigning workers to deal with the stacks of unprocessed paper.

But the IRS faces an uphill task, and it seems Congress is unlikely to provide much help in the near future.

National Taxpayer Advocate Erin Collins recently told members of the Senate Finance Committee that the agency needs to get to a "stable and healthy condition so it can perform its core mission."

Collins told panel members on Thursday that as of early February, the tax collection agency had some 23.5 million tax returns and other documents, including correspondence that require manual processing, in its inventory.

She said the IRS reports that "all paper and electronic individual refund returns received prior to April 2021 have been processed if the return had no errors and did not require further review." But she added, "by implication, that means returns filed as far back as April of last year are still awaiting processing."

The IRS has taken steps to deal with the backlog and prepare for the current tax filing season, which began late last month and ends on April 18. Steps include assigning some 1,200 employees to help process amended returns and correspondence. The agency is also now establishing a "second surge team to put additional resources on the processing challenges," she said.

Collins said the IRS has also announced "a welcome suspension" of many automated notices it sends out while it gets caught up on the backlog. But she said paper returns are the IRS' kryptonite: "The IRS still transcribes paper line by line, number by number."

The IRS also said it was reversing plans to close a tax processing center in Austin, Texas, in 2024. It shuttered a similar facility in Fresno, Calif., last year.

"We applaud the IRS for finally recognizing that those employees in Austin are essential to the agency's ability to dig out from the backlog of returns and correspondence, and that there is an ongoing need for the IRS to retain this capacity," Tony Reardon, president of the National Treasury Employees Union, which represents IRS workers, said in a statement.

The IRS has also been contracting out certain clerical work such as opening envelopes and is requiring mandatory overtime for some employees.

More work with fewer staffers

Adding to the challenge of dealing with individual and business tax returns, the IRS was given the responsibility of sending out three rounds of COVID-19 relief payments in the past two years, as well as distributing the advance earned income tax credits to eligible families.

The extra work comes at a time when the IRS' staff is down 22% from 2010 levels, according to an analysis by the left-leaning Center on Budget and Policy Priorities, with funding down 20%.

Senate Finance Committee Chairman Ron Wyden, D-Ore., places the blame for that on Republicans, who cut the IRS' budget while they controlled Congress. "Republicans could have changed course and corrected these issues in their big 2017 tax law," Wyden said. "They did not. In fact, the budget cuts continued while the tax code got more complicated."

The top Republican on the panel, Sen. Mike Crapo, R-Idaho, insisted that "over the years, I think that the IRS budget has pretty much kept up with inflation."

The Biden administration has proposed a 14% funding increase in the IRS budget for the current fiscal year and sought an additional $80 billion increase over 10 years as part of its now-stalled Build Back Better plan.

But Congress has yet to act on the fiscal year 2022 budget, passing a series of temporary spending measures that have effectively frozen IRS funding at 2021 levels. And although there have been signs that a longer-term deal is in the works, Republicans have warned that any significant IRS spending increase would be a "poison pill" that they would oppose.

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