The IRS shared the full scope of its backlog with the House Ways and Means Committee and the agency’s own government watchdogs. The numbers, obtained by The Washington Post, far dwarf the data the IRS has revealed to the public. The IRS later communicated its plans to adjust the tax filing deadline to House and Senate lawmakers on Wednesday, although the agency briefly stoked confusion on the exact date of the change.
Still, the effects of the IRS backlog have been substantial: The delays have kept some Americans from receiving their tax refunds for months while preventing some cash-strapped workers and companies nationwide from taking advantage of some of the stimulus benefits that Congress authorized to blunt the economic impact of the pandemic.
Ken Corbin, commissioner of the wage and investment division at the IRS, declined to discuss the potential changes to the tax-filing deadline during an interview on Wednesday. But he said the situation reflects the “many, many challenges” the country and agency have faced because of the virus and other more recent obstacles, including inclement weather that slowed its operations.
“The IRS will always have returns in processing,” he said.
For Patrick O’ Conor, the IRS backlog has been costly: He estimates that the government owes him about $16,000 in tax refunds and stimulus payments as a result of significant lags in processing his 2019 and 2020 taxes. The Frederick, Md.-area resident said it has been particularly rough because he and his wife recently had a baby and bought a home in the past year, and they need the money to cover their new expenses.
“We haven’t missed any payments yet on anything,” he said, “but it’s come really, really close.”
The delays threaten the IRS’s ability to deliver a wide array of new relief under the $1.9 trillion American Rescue Plan and could result in uncomfortable questions for IRS Commissioner Charles Rettig, who testifies before the House Ways and Means Committee on Thursday. In recent weeks, the panel’s Democratic and Republican lawmakers had urged the IRS to push the tax-filing deadline from April to later this year, similar to the tax filing deadline for 2019 returns. Some lawmakers celebrated news of a month-long reprieve for tax filings.
“The IRS is in a hole and needs to stop digging,” said Rep. Richard E. Neal (D-Mass.), the chairman of the panel, in a statement pointing out the IRS backlog, its delays in processing some stimulus payments, and its logistical challenges in promptly answering taxpayer questions.
“It is time to assess what must be done now to deliver the service Americans deserve,” he said in the statement. “It is in the best [interest] of all to extend the filing season.”
For some lawmakers, the IRS’s troubles come as no surprise. Under GOP leadership, Congress slashed the agency’s budget by billions of dollars, contributing to the loss of tens of thousands of critical IRS jobs, while leaving long-known deficiencies in its computer systems unaddressed for decades.
The pandemic has brought additional challenges, forcing much of the IRS workforce to complete its tasks from home and saddling the agency with new responsibilities, including three rounds of stimulus payments. Most of these payments have reached hundreds of millions of Americans without too much difficulty, making them one of the government’s most popular relief programs.
But the agency has struggled in other respects, including in its work over the past few years to process tax returns from individuals and businesses alike. The details are laid bare in information the IRS provided to the House Ways and Means Committee as well as the Treasury Inspector General for Tax Administration. A spokesman for the inspector general this week confirmed the figures but said they had not independently audited information it obtained from the IRS for accuracy.
The IRS has not started processing more than 12.3 million paper-based tax returns it has received over the past two years, the majority of which have been filed by businesses, the data shows. The lag time has created major headaches for some companies, potentially precluding them from taking full advantage of tax breaks implemented in past stimulus laws, Democratic aides said.
That backlog has harmed average American families as well: The IRS has begun processing at least 2.4 million individual paper-based tax returns from the 2019 tax year, according to the federal data, which reflects the agency’s work up to March 15. As a result, these Americans may not have received stimulus payments under the relief bill Congress adopted in December, since the stimulus law tied their eligibility for checks to 2019 tax filings.
The IRS cautioned that not every individual in this group may have been eligible to receive the aid, adding that it did not have statistics on the number of Americans still waiting for the earlier stimulus payments. But Corbin, a top agency official, defended the agency’s work getting stimulus payments out and said the number of checks sent matches “what was projected to be the eligible population.”
These 2.4 million Americans still can collect previous stimulus payments as part of their 2020 returns, if they are eligible. But they may face another long wait. The IRS has racked up an additional backlog of 12.4 million returns filed mostly by individuals, both electronically and in paper filings, from the 2020 tax year that it has started processing but suspended pending further, deeper review, according to the government figures.
The tally includes about 7 million returns that the IRS has designated for “error resolution,” meaning they will require manual review that takes months to wrap up. The Post first reported on these figures last week. But the IRS has millions of additional tax returns to analyze, including those involved in investigations related to issues such as identity theft, contributing to its immense workload.
The backlog has only compounded other troubles at the IRS, including technical glitches that took down its online portal for tracking refunds earlier this year — and lingering staff shortages that appear to affect its ability to answer taxpayers’ questions in a difficult year. Only about a quarter of those who call the IRS end up speaking to someone, according to agency data shared with lawmakers, who expressed concerns about the response rate in what is shaping up to be a complicated tax year.
The ranks of the frustrated include Neava Ford, a Kansas City-area resident who filed her 2019 tax returns late in the year, yet hasn’t heard much from the agency five months later. She hasn’t received a stimulus check, either, but Ford says she hasn’t bothered to call the IRS because she knows she’s unlikely to reach anyone.
“I knew it would be pointless with everything that would be going on,” she said.
Acknowledging the issues, the Treasury Department said in a statement Wednesday that the backlog reflects “serious challenges stemming from inherited problems and diminished capacity.” An agency spokeswoman said the IRS so far has sent out 90 million stimulus payments under the American Rescue Plan. “It will take time to work through these challenges we inherited, but this investment will help us in tackling them head on,” the department added.
The agency’s struggles also have generated bipartisan concern on Capitol Hill over the past few months. In February, for example, Republicans on the House Ways and Means Committee — including Rep. Mike Kelly, a member of its oversight panel — wrote the IRS on behalf of constituents who have contacted lawmakers’ offices, trying to track down missing refunds.
“We cannot have millions of hard-working Americans and small business owners waiting up to a year to receive money that they are owed, and the federal government paying billions of dollars in interest on top of that,” said Kelly, adding that his office never received a response to the earlier letter. “This needs to be fixed.”
Democrats, meanwhile, have said the situation points to the need for additional changes at the IRS. The recently adopted $1.9 trillion stimulus includes billions of dollars to help modernize the agency, but party lawmakers say a more permanent fix is necessary to prevent similar backlogs in the future.
“It’s much harder for the IRS to build the plane while flying it,” Sen. Ron Wyden (D-Ore.), the chairman of the Senate Finance Committee, said in a statement. “We need sustained funding so the IRS can build and maintain these systems over the long-term.”
The 2020 tax filing deadline has been pushed back a month to mid-May. A previous version of this story reported an incorrect date for the new filing deadline.