“2023 was an extraordinary year of transition for the IRS and, by extension, taxpayers,” she wrote. “Despair has given way to cautious optimism.”
The annual investigation into the inner workings of the IRS comes as the agency announced that the 2024 tax season will begin on January 29th. The IRS expects more than 128.7 million individual tax returns to be filed by the April 15 deadline.
The Inflation Control Act pumped much-needed funding into the IRS, $80 billion, to hire and modernize its workforce.
Collins pointed to processing delays for identity theft victims as one of the agency's biggest challenges. On average, the IRS takes 19 months to resolve self-reported identity theft cases and issue refunds. Collins calls the response time “unconscionable.”
“Many taxpayers, especially those with low incomes, rely on tax refunds to cover their living expenses,” she wrote in the report.
When a taxpayer notifies the IRS that they are a victim of identity theft, the case is handled by the Identity Theft Victim Assistance Division. But many filers don't realize they're being victimized until they try to electronically file their tax returns. The IRS ended the year with approximately 484,000 of these identity theft cases.
In addition to actual identity theft victims, the IRS flags millions of potentially fraudulent returns each year. The problem is that while many of these returns may be legitimate, applicants only receive one letter asking them to verify their identity, Collins said.
If you move, your notification is unopened or lost, your return or refund will not be processed. In 2022, the IRS suspended processing of 4.8 million tax returns and required taxpayers to authenticate their identities before releasing refunds. As of December 2022, more than 2.5 million tax returns remain suspended because taxpayers still have not verified their identity.
One reason for the backlog was prioritizing telephone services over paper processing. Collins pointed out that his IRS staff in the account management department has two roles: They must answer telephone calls and handle paperwork such as amended returns, taxpayer correspondence, and some identity theft cases.
When employees prioritize phone calls, paper processing suffers. If you prioritize the latter, your ability to receive taxpayer assistance over the phone will be affected.
“It goes back to the whack-a-mole theory,” Collins says. “In order to answer more calls and help more taxpayers, they are shifting resources to answering the phones. But in doing that, they have created deficits and problems for the impersonator groups. ”
Collins urged the IRS to prioritize resolving the identity theft backlog for the 2024 tax season. If the agency reassigns identity theft employees to work phone lines during the 2024 filing season, it will likely make an already unsustainable situation even worse.
“More than three years have passed since the beginning of the pandemic,” Collins wrote in the report. “The IRS should be able to find a way to provide taxpayers with the customer service they need without siphoning services from other important programs.”
There are a few more mistakes.
processing time: The IRS had an inventory balance of more than 6 As of October 28, the number of correspondence and amended tax returns reached 1 million.
Recruitment balance: IRS staffing over the past decade has fallen to its lowest level since the 1970s. The quality of taxpayer services is declining due to staff shortages.
Long delays could worsen if government agencies fail to ramp up hiring. Mr. Collins reported that his 18% of current IRS employees are eligible for retirement, and over the next five years he estimates that will be 37%.
Connect with real people: The IRS answered only 34 percent of calls from people trying to make appointments at Taxpayer Assistance Centers.
Nevertheless, we should not overlook the agency's victories.
“We are grateful for the Office of Taxpayer Advocate's recognition that the IRS made improvements in 2023 and look forward to continuing this momentum into the 2024 tax season and beyond,” IRS Commissioner Danny Wuerfel said in a statement. I will do my best.”
The agency has begun implementing scanning technology so that employees no longer have to manually transcribe paper returns. A new tool has been introduced that allows most taxpayers to submit their documents electronically instead of mailing them.
The IRS is responding to calls from taxpayers at a higher rate (though still not high enough). IRS employees answered only 11% of calls during fiscal year 2021. In 2023, IRS employees answered 29 percent of calls. This is an increase of more than 150 percent from the previous year. The average waiting time for toll-free numbers has been reduced.
“I think the good news is there are fewer moles that we have to whack,” Collins said. “The IRS has kind of moved things along. Overall, more good things happened in 2023 than bad things.”
