The IRS vastly improved its performance and delivered a dramatically better experience for taxpayers this past filing season, according to a new report to Congress.
“What a difference a year makes!” National Taxpayer Advocate Erin M. Collins writes in the preface to her mid-year report released on Wednesday. “In submitting this report, I’m finally able to deliver some good news: The taxpayer experience vastly improved during the 2023 filing season.”
Collins notes that the Covid-19 pandemic years starting in 2020 saw “the worst service in memory” from the tax agency, with lengthy delays in processing returns and correspondence and frustrating difficulties for taxpayers seeking assistance.
Those problems haven’t been eliminated completely, but the IRS has processed returns faster and markedly improved telephone customer service, Collins writes: “The IRS caught up in processing paper-filed original Forms 1040 for individuals and various business returns; refunds were generally issued quickly; and taxpayers calling the IRS were much more likely to get through – and with substantially shorter wait times. Overall, the difference between the 2022 filing season and the 2023 filing season was like night and day.”
The IRS cut its backlog of unprocessed paper tax returns from 13.3 million at the end of the 2022 filing season to 2.6 million at the end of the 2023 filing season, bringing the number back to pre-pandemic levels. And IRS employees answered 35% of calls compared with 10% in 2022.
Collins says that the billions of dollars in additional funding provided by Congress as part of the 2022 Inflation Reduction Act have fueled the service improvements, but the IRS still has further to go in addressing delays in the processing of amended tax returns and updating antiquated technology.
“To date, the IRS has used nearly $1 billion of the IRA funding to hire more employees to process paper-filed tax returns, answer taxpayer telephone calls, and process taxpayer correspondence. The strong improvement in taxpayer services this filing season is mostly due to this increased staffing,” the report says. “But to achieve and sustain transformational improvement over the longer term, the IRS must focus like a laser beam on IT.”
Another problem: Because customer service representatives both answer calls and process correspondence, the agency’s emphasis on improved phone service has limited progress in addressing the backlog of amended returns. And identity theft cases now take an average of nearly 15 months to close, about three months longer than last year.
Some $21 billion of the $80 billion in additional funding for the IRS will be rescinded as part of the recent deal to raise the debt limit struck by President Joe Biden and House Speaker Kevin McCarthy. But that money could eventually be restored, and Biden administration officials have suggested that the clawbacks would not affect the agency in the near term.
Collins sounds optimistic as well. “With adequate funding, leadership prioritization, and appropriate oversight from Congress, I believe the IRS will make considerable progress in the next three to five years in helping taxpayers comply with their tax obligations as painlessly as possible,” she writes.