Agency Watchdog: IRS in 'Crisis'

The Internal Revenue Service, behind on tax returns due to staffing shortages and backlogs, is in "crisis," national taxpayer advocate Erin Collins wrote in her annual report published Tuesday.

At least 11.6 million returns are still unprocessed from last year — the IRS regularly enters filing season with approximately 1 million tax returns from the previous year — and 2019 returns were not cleared until June 2021.

The agency is also dealing with a surge in phone calls. Just 7% of taxpayers reached an agent during last year's filing season, according to the report. The IRS received more than 145 million calls from Jan. 1 through May 17, or more than four times its normal call volume.

The agency's workforce has shrunk 17% since 2010, while the number of individual returns increased 19% in that same time frame.

"During 2021, tens of millions of taxpayers were forced to wait extraordinarily long periods of time for the IRS to process their tax returns, issue their refunds, and address their correspondence," wrote Collins.

"Paper is the IRS' kryptonite, and the agency is still buried in it," she added.

The coronavirus pandemic, she said, "did not create new challenges for the IRS as much as it highlighted longstanding challenges and areas that require attention.

"My main recommendation to Congress is to provide the IRS with additional funding to enable it to meet taxpayer needs and to conduct sufficient oversight to ensure the additional funding is well spent."

The IRS cautioned it is still working on "prior-year individual tax returns that have not been fully processed."

"In many areas, we are unable to deliver the amount of service and enforcement that our taxpayers and tax system deserves and needs," IRS Commissioner Chuck Rettig said in a statement. "This is frustrating for taxpayers, for IRS employees, and for me. IRS employees want to do more, and we will continue in 2022 to do everything possible with the resources available to us."