Tax season delays, confusion and unanswered calls for help could be here to stay.
Tax preparers starting to catch their breath after the extended May 17 filing deadline describe the 2020 tax season as chaotic, nightmarish and an ever-moving target. Many of this year’s challenges, they say, stem from issues within the Internal Revenue Service – some of which may continue to affect taxpayers next season.
Heavily backlogged and stretched thin, the IRS could not fully meet the demands of this tax season. Taxpayers filed returns only to turn around and refile or amend returns when last-minute tax relief measures were rolled out. Others received automated letter after automated letter from the IRS, which had yet to review taxpayers’ responses in a mountain of unopened mail. Stimulus checks never arrived. Some refunds were delayed. And experts say a record number of tax extensions were filed.
Amid this confusion, taxpayers lacked clarity from the IRS and were unable to get help. The IRS reports receiving 1,500 calls per second at its peak, and only 2% of calls were answered by a customer service representative, according to the Washington Post. Without assistance, incorrectly filed returns can be costly for taxpayers.
“The IRS is significantly overwhelmed,” says Cari Weston, director for tax practice and ethics for the American Institute of CPAs. “They were so significantly behind that they were still processing prior year tax returns, they had still not cashed checks people sent in a year and two years before, the phone lines were so busy that taxpayers couldn’t get through to ask basic questions or get through if they needed help resolving an issue.”
In addition, the ongoing coronavirus pandemic caused many individuals and families to experience a significant life event – such as unemployment, a transition to self-employment or a relocation out of state – further complicating tax filing. Resources like volunteer-based community tax services and walk-in tax clinics, which typically serve elderly and low-income individuals, were closed and tax preparers still catching up from last year were unable to take new clients.
“Everything about the way we operated (this year) was a little bit different,” Weston says. “I would say to my clients: Anytime you are anticipating or coming into a major life change, call me. Say, ‘Hey Cari, we’re moving, we want to sell a house, we want to buy a new car.’ Those are the kinds of things that your client only has every five to 10 years. But then, think of how many of those things people were going through last year.”
Though some of the frustrations taxpayers faced can be attributed to the pandemic, experts say the backlog is so significant that it has created a snowball effect that may lead to continued delays.
“The IRS is not going to be able to catch up to the extent they need to before next tax season, given the stacking they have,” says Angela Garrett, certified public accountant and principal at Wertz & Company in Irvine, California. “They are trying to dig themselves out of a hole, and I don’t know that they are going to be able to do that. They went into filing season already behind, they have all of the new returns to process, they still have all of that backlog from before and there’s just more coming.”
Though heightened by the pandemic, issues with staffing have been building with the IRS for years, says Lawrence Pon, a tax specialist in Redwood City, California.
“The IRS is severely understaffed,” he says. “We’re at a 40-year low in terms of personnel, and there’s been a record number of retirements – losing very experienced people.”
However, changes may be ahead. The Biden administration has proposed numerous tax law changes that some specialists fear could bring a new wave of updated forms, retroactive adjustments and delays. The administration has also proposed increasing IRS funding by $80 billion and adding nearly 87,000 employees over the next decade to manage the workload.
In the meantime, patience may be taxpayers’ only option to combat delays and confusion when the next tax season rolls around.
“The key is to make sure taxpayers are communicating with their preparers and providing them with all of the correspondence they’re receiving from the IRS,” Garrett says. “Be patient. We try to get through as quickly as we can.” And for now, she says, “I’m holding on to my optimism until I see what the law changes will be.”