The Internal Revenue Service (IRS) has made remarkable progress in processing tax returns at a faster pace this year compared to previous years, while also improving accessibility for customer service inquiries, as per a report presented to Congress on Wednesday.
Despite the need for a comprehensive update to the agency’s information technology services and an increased workforce to handle incoming calls, these developments mark a substantial improvement following years of backlogs and chronic underfunding.
According to the latest update provided by National Taxpayer Advocate Erin M. Collins, the IRS successfully reduced its backlog of unprocessed paper tax returns by an impressive 80%, from 13.3 million returns at the end of the 2022 filing season to 2.6 million by the close of the 2023 filing season. Furthermore, the agency now answers 35% of calls, compared to a mere 11% previously.
Collins emphasized, “The difference between the 2022 and 2023 filing seasons is like night and day. It signifies a return to pre-pandemic levels.”
Thanks to the enactment of climate, health care, and tax legislation under President Joe Biden’s administration, the IRS secured a significant budget of $80 billion for tax collection efforts. Agency leaders promptly allocated these funds to augment the IRS workforce, which had suffered a decline in numbers reminiscent of the 1970s due to retirements, attrition, and inadequate compensation that failed to keep up with inflation.
However, recent reductions in funding occurred when the president and Congress agreed to reclaim over $20 billion in exchange for suspending the country’s $31.4 trillion debt ceiling.
While the Biden administration officials have assured minimal impact on the agency’s operations over the coming years, Collins’ report underlines the IRS’s efforts to fulfill the Treasury Department’s customer service objectives with its existing workforce, leading to certain challenges. For instance, it currently takes an average of 15 months to resolve identity theft victim assistance cases.
This delay arises from the IRS reallocating workers who were previously assigned to address identity theft matters to handle accounts management and answer incoming phone lines. The scarcity of staff available to address identity theft concerns is resulting in “harm to taxpayers who were victims of identity theft.”
The report highlights that other non-tax issues stemming from identity theft might take even longer to resolve. It states, “The pandemic undoubtedly played a significant role in the delays, but policy decisions have also contributed to the problem.”
Earlier this year, under the leadership of Commissioner Daniel Werfel, the IRS disclosed its plans for utilizing the increased funding to enhance operations. The outlined initiatives encompass investing in new technology, hiring additional customer service representatives, and expanding the agency’s capacity to audit high-wealth taxpayers.
Within the report, Collins’ office urged the IRS to concentrate its efforts on modernizing outdated technology in order to enhance the taxpayer experience.
“With adequate funding, strong leadership prioritization, and effective oversight from Congress, I am confident that the IRS will make significant strides over the next three to five years in facilitating taxpayer compliance with their obligations while minimizing hardships,” Collins concluded.