The April 15 tax filing deadline is less than a week away at a pivotal moment for U.S. tax administration, with the IRS undergoing big changes in the wake of a major funding boost and offering new ways for Americans to file their taxes.
As of March 29, the IRS has received more than 90.3 million tax returns, and metrics are generally trending higher for this tax year compared to last.
The number of returns received by the IRS is up 0.2 percent compared to the same time last year, and digitally filed returns are up 0.3 percent, according to IRS statistics.
Notably, overall usage of the IRS website is up a whopping 18.3 percent, continuing the trend of increasing digitalization in the tax sphere.
Self-prepared digitally filed returns are up 1.1 percent compared to last year, while professionally-prepared online returns are down 0.5 percent on the year.
A recent analysis of IRS databooks over the past decade by The Hill showed that as more people have been filing their returns online, they’ve also been relying less on professional tax preparers to get their returns filed.
Here are five things to know about this tax season ahead of the April 15 deadline.
IRS service is improving after the pandemic crunch
Relative to recent years, IRS phone call wait times have been going down, productivity has been going up, and the backlog of tax returns that swamped the agency following the pandemic has been easing, a recent report by the Government Accountability Office (GAO) found.
Average call wait times decreased to three minutes during the 2023 filing season from 28 minutes in 2022, and the IRS answered 65 percent more calls last year than it did in the year before, according to the GAO’s 2023 filing report released in February.
The agency has also been working through its backlog of tax returns.
“By the end of the last filing season, IRS had processed nearly all 2022 returns and had a smaller backlog of 6.1 million returns – 10.3 million fewer than at the same point the year before,” the GAO reported.
That’s compared to a backlog of 16.5 million tax returns in December 2020.
Though the IRS is trending in the right direction on backlogs, both the GAO and the Treasury Inspector General for Tax Administration (TIGTA) say the IRS is not yet back to prepandemic standards in all areas.
“Concerns remain with the inventories of amended tax returns remaining to be worked, which are significantly above the pre-Pandemic levels,” TIGTA, another agency watchdog, noted in a March report.
Beware of tax scams and bad advice
As tax filing has moved increasingly online over the past decades, tax scams have proliferated across cyberspace.
Some of these are perpetrated by outright fraudsters in the form of bogus text messages and emails, while others occupy a gray area of shady advertising and self-interested business advice.
TIGTA regularly reminds taxpayers that the IRS generally won’t contact taxpayers by phone and won’t ask for payment using gift cards, prepaid debit cards, money orders or wire transfers. The agency also won’t request personal or financial information by email, text, letter or social media.
Enforcement agencies are targeting automated scams that are throwing taxpayers for a loop, with one recent action by the Federal Communications Commission (FCC) going after a fake robocall campaign by Veriwave Telco known as the “National Tax Relief Program.”
“Approximately 15.8 million calls playing pre-recorded messages pertaining to a ‘National Tax Relief Program’ were placed. The Bureau found no evidence that this program actually exists,” the FCC said in a Friday release.
Social media influencers offering unsound tax advice are also posing an issue this tax season.
“The IRS is aware of various filing season hashtags and social media topics leading to inaccurate and potentially fraudulent information,” the agency said in a Monday release. “The central theme of these examples involves people trying to use legitimate tax forms for the wrong reason.”
Research suggests that bad financial advice originating on social media extends beyond the realm of taxes and into other areas of financial planning. One 2023 paper from the University of California, Berkeley and the Swiss Finance Institute classified a majority of financial social media influences as having “negative skill” in offering online advice.
Direct File is a new way to file taxes online
A free new online tax filing tool is available this year as part of a pilot program that allows taxpayers to file directly on the IRS website.
Known as Direct File, the pilot program is available in 12 states including New York, California, Texas, Florida and Washington, and can make suggestions to taxpayers about the best way to fill out their returns.
The IRS announced new functionality for the direct file service Tuesday, which will be able to pull taxpayers’ adjusted gross income from previous years. After studying the initial tranche of users, the IRS found income estimates were a common source of mistakes and that the new feature would help to correct this error, a Treasury official said.
“This important update will allow Direct File users to take advantage of information the IRS already has to simplify the filing process even further,” IRS Direct File lead Bridget Roberts said in a statement.
While the program has experienced a solid rollout with no major technical issues reported so far, the GAO noted Tuesday that there are some uncertainties about cost estimates for the program and that the IRS may not be documenting costs properly.
The GAO and TIGTA “found that IRS had no documentation to support the underlying data, analysis, or assumptions used for Direct File cost estimates.”
Tax preparers launch lobbying blitz as direct file ramps up
Against the backdrop of the IRS delivering its first free direct online filing tool, private-sector tax preparers have been lobbying hard on behalf of their own products.
One analysis by money-in-politics watchdog Open Secrets found that Intuit, the maker of popular tax prep software TurboTax, “set a new company record for federal lobbying in 2023, spending nearly $3.8 million — more than it spent in any prior year.”
Senate lobbying disclosures show that Intuit spent $960,000 petitioning government officials between October and December in order to “support intellectual property protections,” among other causes.
“We know that Turbo Tax didn’t build its monopoly on tax filing overnight. The success of the direct file rollout is creating a strong foundation for future expansion of a free and simplified public option for tax filing,” political strategist Adam Ruben with advocacy organization the Economic Security Project said in a statement to The Hill.
Regular operational spending siphons IRS overhaul funds
The Direct File launch is just one feature of a multifaceted overhaul of the IRS now taking place due to a $78 billion boost in the agency’s budget over the next decade, passed as part of Democrats’ 2022 Inflation Reduction Act (IRA).
Recent findings by TIGTA show that the IRS has spent $4.4 billion, or 5.6 percent, of its IRA funding so far, though nearly half of that was used to supplement the agency’s 2023 budget, which wasn’t enough to cover regular operating expenses, according to IRS officials cited by TIGTA.
The boost is going toward a beefing up of audits and enforcement, an operations update, an expansion of taxpayer services and a technology modernization.
Far and away, the most allocations made so far have been to the taxpayer services component of the new funding, with more than a third of it having been spent in the first year.
Only 1 percent of the new enforcement bucks have been spent, which is the largest single tranche of funds, at more than $44 billion. Amped enforcement requires the hiring of skilled auditors, which experts say takes time. Twenty-one percent of the $4.8 billion set aside for a technology update has also been spent.
As the IRS draws on its funding boost to keep the lights on and employees paid, the GOP fight to rescind the funding has taken a pause, with no new rescissions announced in the latest government funding battles after nearly a quarter of the money was walked back last year in the form of regular appropriations.