IRS backlog of tax returns just as bad as last year

The backlog of tax returns that has delayed millions of personal refunds and drowned the IRS in obsolete paper tax filings is just as bad this year as it was last year.

“For some, this filing season may have felt like Groundhog Day,” National Taxpayer Advocate Erin Collins wrote in a blog post on Thursday, referring to the movie “Groundhog Day” starring Bill Murray. “Numerically the IRS is in about the same place that it was around the same time last year.”

In fact, things may even be slightly worse this year. The IRS had its 2022 backlog down to about 8 million unprocessed paper returns as of the end of October, whereas it had about 7 million 2021 paper tax returns in its inventory around the same time last year, Collins wrote.

“I look at the numbers and see millions of taxpayers that are still waiting for their returns to be processed,” Collins wrote.

The status report comes after the IRS was allotted $80 billion by Democrats in Congress to beef up its operations, increase enforcement against tax cheats and modernize its systems.

Democrats say the funding is long overdue and will help to end differences in enforcement between rich and middle-class taxpayers in a complicated U.S. tax system.

Republicans have argued that the money will be used to hire new auditors and go after the middle class and small-business owners.

GOP lawmakers have vowed to scrap the new IRS funding if they win control of the legislature, but results of Tuesday’s midterm elections put this plan in limbo.

Even with full Republican control of Congress, a Democratic administration in the White House would likely ensure the new IRS funding remains in place and ready to be disbursed over the next decade.

While the new funding is broken out into big chunks in the Democrats’ Inflation Reduction Act, the IRS is now coming up with a plan on exactly how to spend the money.

“As the National Taxpayer Advocate, I want the best possible service for taxpayers and will continue to provide my input as the IRS creates its Operational Plan with the increased funding provided by Congress,” Collins wrote Thursday.

Whether the IRS will be able to climb out from under the backlog before the new funding comes into effect for the agency is uncertain.

IRS officials have told The Hill that the new funding represents a watershed moment and a new day for the agency.

The outgoing IRS Commissioner Chuck Rettig said in a farewell memo to employees in November that the new funding was “desperately needed to transform the agency.”

“This legislation is not about auditing or pursuing hardworking people who pay their taxes,” he wrote to staff. “It’s an investment in the future of our country to make the IRS serve taxpayers, through improved technology and fair enforcement of the tax code.”

“Ultimately, these investments will make it easier for people to interact with the IRS and improve our audit tools – making it even less likely for honest taxpayers to hear from the IRS or receive an audit letter,” he added.

Updated 1:13 p.m.