Despite a significant number of challenges faced by taxpayers in 2022, National Taxpayer Advocate Erin Collins has reason to be more optimistic for 2023.
“We have begun to see the light at the end of the tunnel,” Collins wrote in the 2022 annual NTA report to Congress, released on January 11, 2023. “I’m just not sure how much further we have to travel before we see sunlight.”
She highlighted three key areas that are providing a foundation for the optimistic outlook for this year:
- The IRS has largely worked through its backlog of unprocessed returns, though there still remains a high volume of suspended returns and correspondence;
- Congress has provided funding to increase customer service staffing; and
- The agency has already added 4,000 new customer service and is seeking to add 700 additional employees to provide in-person help at its Taxpayer Assistance Centers.
Collins did caution that while she is optimistic for the future, the near term will still be faced with challenges. In particular, she noted that while new staff are being trained, some of the issues that have been plaguing the IRS will continue.
“As new employees are added, they must be trained.” Collins noted. “For most jobs, IRS does not maintain a separate cadre of instructors. Instead, experienced employees must be pulled off their regular caseloads to provide the initial training and act as on-the-job instructors. In the short run, that may mean that fewer employees are assisting taxpayers, particularly experienced employees who are likely to be the most effective trainers.”
Taking into consideration the time needed to train new employees, some of the challenges from 2022 that were highlighted in the report could still be an issue early into 2023.
That could mean ongoing processing and refund delays. The COVID-19 pandemic created a significant backlog of unprocessed returns and while the IRS has made strides to reducing that backlog, as of December 23, 2022, the agency reported it still has a backlogged inventory of about 400,000 individual tax returns and about 1 million business tax returns. It could also mean ongoing delays in processing taxpayer correspondence and other cases in the Accounts Management function.
Another issue that could linger as more employees are being trained is getting a live person on the telephone. NTA reported that about one in eight calls from taxpayers to the agency made it through to a live person, with hold times for taxpayers averaged 29 minutes.
Tax professionals were able to get through to a live person about ever one in six calls to the Practitioner Priority Service, with about 25 minutes of hold time on average.
“Tax professionals are key to a successful tax administration,” Collins wrote. “The challenges of the past three filing seasons have pushed tax professionals to their limits, raising client doubts in their abilities and created a loss of trust in the system.”
The report makes a number of recommendations both to the IRS and legislative recommendations to strengthen taxpayer rights and improve tax administration.
To the IRS, Collins recommends a couple of employee-related items – hiring and training more human resource employees to manage the hiring of all agency employees and ensuring all IRS employees are well-trained to do their jobs.
On the IT front, she also recommended improvements to online account accessibility and functionality to make them comparable to private financial institutions’ online accounts, as well as temporarily expand the uses of the documentation upload tool or similar technology. Also, there was a call to enable all taxpayers to e-file their tax returns.
Among the legislative recommendations are amending the “lookback period” to allow tax refunds for certain taxpayers who took advantage of the postponed filing deadlines due to COVID-19; establish minimum standards for paid tax preparers; expand the U.S. Tax Court’s jurisdiction to adjudicate refund cases and assessable penalties; modify the requirement that written receipts acknowledge charitable contributions must predate the filing of a tax return; and make the Earned Income Tax Credit structure simpler.