June 30, 2021
Candace J. Dixon
The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that helps taxpayers and protects their rights. They are required by statute to submit a year-end report to Congress that makes administrative recommendations to resolve taxpayer problems. The IRS is required to respond within three months. Under this authority, the National Taxpayer Advocate annually transmits to the Commissioner all administrative recommendations proposed in her year-end report for response.
The National Taxpayer Advocate must submit two annual reports to the House Committee on Ways and Means and the Senate Committee on Finance directly without any prior review or comment from the Commissioner of Internal Revenue, the Secretary of the Treasury, or the Office of Management and Budget.
The first report, due by June 30 of each year, must identify the objectives of the Office of the Taxpayer Advocate for the fiscal year beginning in that calendar year.
National Taxpayer Advocate Erin M. Collins released her statutorily mandated FY 2022 Objectives Report To Congress this past Thursday. The report presents an assessment of the 2021 filing season, identifies key objectives TAS will pursue during the upcoming fiscal year, and contains the IRS's responses to each of the 73 administrative recommendations the Advocate made in her 2020 Annual Report to Congress.
"This past year and the 2021 filing season conjure up every possible cliché for taxpayers, tax professionals, the IRS, and its employees," Collins wrote. "It was a perfect storm; it was the best of times and the worst of times; patience is a virtue; with experience comes wisdom and with wisdom comes experience; out of the ashes we rise; and we experienced historical highs and lows."
The IRS Processed Most Tax Returns and Issued Most Stimulus Payments on Time
The report from TAS to Congress lauds the achievements of the IRS during the 2021 filing season in processing 136 million tax returns and issuing 96 million payments totaling $270 billion despite the challenges of a pandemic; an extended tax season; ongoing new legislation; and reduced staffing combined with additional responsibilities, including issuing 3 rounds of stimulus payments, for a total of 475 million payments worth $807 billion over a 15 month period.
"The IRS and its employees deserve tremendous credit for what they have accomplished under very difficult circumstances," Collins wrote, "but there is always room for improvement."
The reports also makes observations that highlight areas in need of significant improvement, not just due to the pandemic, but overall.
As we look forward and plan our fiscal year (FY) 2022 objectives, this past filing season is still painfully visible in the rearview mirror. It was perhaps the most challenging filing season taxpayers, tax professionals, and the IRS have ever experienced. This past year and the 2021 filing season conjure up every possible cliché for taxpayers, tax professionals, the IRS, and its employees — it was a perfect storm; it was the best of times and the worst of times; patience is a virtue; with experience comes wisdom and with wisdom comes experience; out of the ashes we rise; and we experienced historical highs and lows.
The IRS Finished the Filing Season with Over 35 Million Tax Returns Awaiting Manual Reviews
The IRS finished the filing season with a backlog of over 35 million income returns, including 16.8 million paper returns waiting to be processed; 15.8 million returns suspended during processing that require further review; and 2.7 million amended returns awaiting processing. This backlog is largely a result of the pandemic-related evacuation order that restricted employee access to IRS facilities.
As of May 33, 2021, 10.3 million of the 15.8 million returns awaiting manual review were in the Error Resolution (ERS) unit due to discrepancies between the amount of the Recovery Rebate Credit claimed by taxpayers and the amount IRS records indicated the taxpayer qualified for; and the use of 2019 earnings instead of 2020 earnings for the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC).
In addition, there were 2.0 million returns in the Unpostables unit as a result of problems with taxpayer identification numbers or names, and 3.7 million returns were sent to the Taxpayer Protection Program in need of additional verification from taxpayers because of suspected identity theft, of which 1.4 million have been verified as non-identity theft, with 2.1 million still suspected.
The IRS Received a Record Volume of Telephone Calls, and Only 3 Percent of Callers Reached a Telephone Assistor on the "1040" Lines
The report calls for additional funding and greater efficiency to improve the phone statistics of this year, citing the difficulties customer service representatives experienced with an “unrelenting“ volume of calls and their inability to provide specific information despite doing their best, referencing the fundamental taxpayer right to be informed.
The IRS received more telephone calls during the 2021 filing season than it ever received in a full fiscal year with 167 million calls - 4 times as many as 2020. They received telephone calls at the rate of 1,500 per second during the peak of filing season, with only seven percent of taxpayer calls reaching a telephone assistant. The most frequently called toll-free number - the “1040” line for individual income tax returns - logged 85 million calls, with only three percent reaching a Customer Service Representative.
The IRS Can Apply Lessons Learned from the Past Year to Improve Its Operations in the Future
The pandemic exposed weaknesses and vulnerabilities that must be strengthened; it forced the IRS to experiment with new approaches to old problems; it led to a renewed awareness of the impact of cuts to the IRS’s budget over the past decade and the IRS’s need for additional funding; and it is causing the IRS and congressional overseers to collaborate on steps to improve the IRS’s performance going forward to provide taxpayers with the service they deserve.
National Taxpayer Advocate Recommendations
:
Development of more accessible and “robust” online accounts. The IRS offers online account access for taxpayers, but its usefulness is limited in two ways. First, most taxpayers who try to establish online accounts fail because they can't pass the e-authentication requirements (I thought it was just me, hmmm...), which the IRS is addressing. Second, the functionality of the accounts is quite limited.
TAS Recommendation: TAS recommends that taxpayers be given the option of using online
accounts for all common transactions, similar to the way customers routinely interact with their
banks through online accounts. TAS also recommends that tax practitioners be given access
to online accounts on behalf of their clients, and that the IRS prioritize providing this service to
practitioners.
Expansion of customer callback technology to all IRS toll-free telephone lines. The IRS offers this option on some of its telephone lines, but it is not yet offered on most lines, including the high-volume lines.
TAS Recommendation: Particularly in light of the telephone challenges taxpayers have
experienced over the past year, TAS recommends that the IRS make customer callback an
option on all high-volume telephone lines.
Reduction of barriers to e-filing. Ten percent of returns are mailed in on paper, many because of IRS e-filing obstacles: requirements to submit statements or substantiation that can’t be e-filed; forms not accepted electronically used by a limited amount of taxpayers; and overrides in tax preparation software that render returns unacceptable to be filed electronically.
TAS Recommendation: TAS recommends the IRS address these limitations so that all
taxpayers who want to e-file their returns may do so.
Implementation of scanning technology for paper returns. When returns are filed on paper, the IRS manually transcribes the data line-by-line into IRS systems. In 2020, the IRS received 17 million individual income tax returns and millions of business and other tax returns on paper. Manually entering data from so many paper returns is an enormous task, and transcription errors are common, especially on longer returns. Scanning technology is available that would allow the IRS to machine read paper returns and avoid the need for manual data entry.
TAS Recommendation: TAS understands the IRS is exploring the implementation of scanning
technology for paper 2020 tax returns and recommends it do so for future years as well.
Expansion and Permanence of Digital Transmission and Acceptance of Documents and Digital Signatures. The March 2020 closure of IRS offices and mail facilities made it impossible for IRS employees to receive paper documents from taxpayers. The report calls for some of the resulting temporary guidance issued by the IRS authorizing employees to accept and transmit documents related to the determination or collection of a tax liability by email using a secure messaging system to be made permanent. Employees are also permitted to accept images of signatures (scanned or photographed) and digital signatures on documents related to the determination or collection of a tax liability.
TAS Recommendation: TAS recommends the IRS make these temporary solutions permanent
and continue to explore and prioritize additional digital communication options.
Expansion of Videoconferencing. Videoconference technology lets taxpayers and their authorized representatives be both seen and heard and allows them to share documents without being physically present. The IRS Independent Office of Appeals uses WebEx technology for virtual face-to-face conferences among taxpayers, representatives, and Appeals Officers, and The IRS Office of Chief Counsel and the U.S. Tax Court are conducting video communications and virtual trials using ZoomGov.com. This adds a vital human interaction element to communications with taxpayers, and it provides options for those with difficulty traveling or the inability to take extended time off from work.
TAS Recommendation: TAS has recommended the IRS evaluate the feasibility of expanding
the use of these technologies to as many taxpayer functions as possible without removing the
in-person options in order to help fill voids in face-to-face service at Taxpayer Assistance
Centers (TACs); working with revenue agents or revenue officers; and as a supplement to
correspondence audits, where talking face-to-face may give the taxpayer a better
understanding of their return.
IRS Responses to National Taxpayer Advocate Administrative Recommendations
The National Taxpayer Advocate made 73 administrative recommendations in her 2020 year-end report and then submitted them to the Commissioner for response. The IRS has agreed to implement 48 (66 percent) of the recommendations in full or in part.
You can read the IRS's responses to the report that are published in this appendix.
Resources:
Full Report - FY 2022 Objectives Report To Congress
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Taxpayer advocate's number is in your local directory and on the Contact Us webpage
Call TAS toll-free at 877-777-4778
Taxpayer Advocate Service has information about TAS and your rights under the Taxpayer Bill of Rights
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