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2021 Tax-Filing Season Was ‘Perfect Storm,’ Advocate Says

June 30, 2021, 2:16 PM

The IRS faced a number of problems during the 2021 tax-filing season as a result of the Covid-19 pandemic, including delayed refunds and historically low levels of telephone service, National Taxpayer Advocate Erin Collins said Wednesday.

The IRS was pushed to its limits during the most-recent tax season, in part because of pandemic relief enacted by Congress before and during the season that forced the agency to carry out quick programming changes. The IRS was also tasked with delivering a third round of stimulus checks in the middle of the tax-filing season.

“The 2021 filing season was the quintessential definition of a perfect storm,” Collins said in her midyear report to Congress.

The agency finished the filing season with a backlog of more than 35 million individual and business income tax returns that required manual processing—meaning a person needed to get involved—causing refund delays, Collins noted. That’s a four-fold increase from the 7.4 million unprocessed returns at the end of the 2019 filing season—the last normal season prior to the pandemic, she said.

About half of those returns were unprocessed paper returns and the other half were returns set aside for additional review—a significant portion of which were selected because of issues tied to Congress’s Covid-19 relief, Collins said.

The IRS also received 167 million telephone calls during the 2021 filing season, more than four times the number of calls in 2019. Only 9% of callers, however, reached a live assistor.

Collins said both of these problems can be fixed, in part, by providing the IRS with more funding to beef up its technology and staffing.

The Biden administration is seeking a more than 10% increase to the agency’s budget for fiscal year 2022, along with an overall boost of nearly $80 billion over 10 years. But it’s up to Congress to approve the final funding numbers.

One of the effects of the pandemic was to bring “a renewed awareness of the impact of cuts to the IRS’s budget over the past decade and the IRS’s need for additional funding,” Collins said in her report.

To contact the reporters on this story: Allyson Versprille in Washington at aversprille@bloombergtax.com; Isabelle Sarraf at isarraf@bloombergindustry.com

To contact the editors responsible for this story: Patrick Ambrosio at pambrosio@bloombergtax.com; Yuri Nagano at ynagano@bloombergtax.com

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