| The good news (I guess) is that tax filing season began on Monday. The bad news (I know) is that it's apparently going to a very messy and frustrating experience for taxpayers.
You have been warned.
To begin with, millions of taxpayers remain without refunds some nine months after filing. Yes, you read that correctly.
To that point, an IRS backlog from last year includes 9.8 million individual returns with errors, 2.8 million business returns and 2.3 million amended returns. All this according to a report from the National Taxpayer Advocate.
"The IRS is in crisis and needs to apply resources to its core mission – processing these returns and paying the corresponding refunds," the National Taxpayer Advocate report stated.
What does that mean for you? Apparently a very problematic tax season that will likely mean refund delays as the IRS combats that backlog and also deals with staff shortages. The IRS staffing is down 17% since 2010. That has taken a toll as IRS call centers just can't keep up with demand.
That will translate to long wait times if you need to call with tax questions. Treasury officials noted that in the first half of last year, fewer than 15,000 employees were available to handle more than 240 million calls — one person for every 16,000 calls.
The IRS says it was unable to answer 66% of the calls it received last year and processing centers for paper tax returns were closed for much of the pandemic.
"You definitely don't want to be guessing this year," said Tommy Lucas, a certified financial planner and enrolled agent at Moisand Fitzgerald Tamayo. "You want to make sure that your returns are right because it's going to be really difficult to get a hold of anyone [at the IRS] to talk through your situation."
Quite simply, "This could be a very frustrating tax season for both the taxpayers and tax professionals," said Charles Rettig, the IRS commissioner.
So, what should you do?
The IRS is encouraging taxpayers to use online resources before calling. Tax experts recommend you file early and to file electronically because filing paper forms is going to add time.
The IRS anticipates that most taxpayers who file electronically, choose direct deposit and have no issues with their tax return will receive their refund within 21 days. It is sending out letters now that should be used to accurately prepare returns.
Of course, many Americans won't have the paperwork they need to file their taxes until the end of January. Still, they should start gathering the materials they can and decide soon if they might want to enlist professional assistance, experts say.
"If you are seeking the help of a professional tax preparer or a CPA to file your taxes, they may be super-bottlenecked [in April]," said Sheneya Wilson, CPA and founder of Fola Financial in New York.
People can also start to prepare by looking at their previous tax return, tax experts say, which will give a guideline of what information you'll need to collect for 2021.
Barry Melancon, president and CEO of the American Institute of CPAs, stressed that taxpayers should be patient because it could take multiple months before the IRS addresses an amended tax return, which will most likely be manually processed.
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