According to a report, millions of Americans are facing delays at the IRS, due to which they are not able to get their tax refunds on time. new report From the National Taxpayer Advocate, an independent watchdog that is part of the IRS.
The report, published annually to highlight the IRS's most serious problems, comes after the agency was billions in new funding To improve its technology and crack down on wealthy tax cheats through the Inflation Reduction Act. Yet for many taxpayers, dealing with the IRS involves “delays, frustrations and unnecessary costs,” Erin M. Collins, a taxpayer attorney, wrote in the report.
The problems highlighted in the report echo those Harassed millions of taxpayers During the pandemic, when the IRS closed its offices, many returns got stuck in a bottleneck, leading to delayed refunds. Collins said that while the worst of those issues have been resolved, the IRS continues to struggle in some areas, such as processing paper returns and dealing with taxpayers who are victims of identity theft, leading to long delays in refunds. Can.
“Despite the reforms I have outlined, taxpayers continue to face challenges in dealing with the IRS,” he wrote.
Nearly $80 billion in funding from the IRA has helped the tax agency hire more staff, some of whom have increased its customer service support. But the report said about $6 out of every $10 of new funding is directed to enforcement, or to boost audits of wealthy tax cheats and businesses that violate tax laws. goes.
“I have previously criticized this extreme imbalance in funding priorities,” Collins wrote in the report, adding that he believes more money should be directed toward Taxpayer Services, an IRS unit that provides information to taxpayers with questions, problems and Helps deal with other dilemmas.
The IRS has already made improvements in some of the areas highlighted by Collins, IRS Commissioner Danny Werfel said in a statement to CBS MoneyWatch. The NTA report also acknowledges progress made by the IRS, which Werfel said shows “what a well-funded IRS can do.”
“It's important to keep that momentum going because we believe the agency's work is not done — not by a long shot,” he said. “It is important that the IRS continue this progress to better serve taxpayers and the nation.”
Here's who is facing delays in tax refunds
Collins reiterated his earlier point criticisms The IRS: That paper return is the agency's “kryptonite.” Unfortunately, he said in his most recent return, the IRS continues to receive more than 10 million paper income tax returns each year — while it also receives another 75 million paper forms from taxpayers.
He said that while the IRS has made progress in processing paper returns, it's still not enough. He said it could still take several months for the IRS to complete processing the paper returns.
And many people who e-file also face delays if their 1040s are rejected, an issue that affected 18 million taxpayers in fiscal year 2024, or 12% percent of returns, in their report. Having said. These rejections could be for issues like a PIN that doesn't match the previous year's return, or an adjusted gross income number that doesn't match the previous year.
,[M]Most rejected returns are valid, requiring taxpayers to go through additional hurdles to re-submit their returns electronically or submit returns on paper. Delay in refund.”
People who have been victims of identity theft are another group that often faces delays in getting resolution. He said nearly half a million taxpayers were still trying to resolve their issues, although it took the IRS an average of about 22 months to resolve cases and send refunds to victims.
The report notes that this can be stressful for taxpayers waiting for their refunds, but it also creates an additional cost for the federal government, which must pay interest on overpayments that it pays back over time. Doesn't.
Meanwhile, some businesses are facing delays due to the Employee Retention Credit, a tax benefit created in the pandemic to help businesses stay afloat. But the IRS has Marked ERC is vulnerable to fraud, causing delays in processing returns.
The report said the IRS is “still sitting on a backlog of approximately 1.2 million claims through October 26, 2024” for returns claiming the Employee Retention Credit. “Although intended to reduce payments of ineligible claims, it has resulted in lengthy delays in payment of eligible claims submitted by employers who, in some cases, are dependent on ERC refunds to remain in business.”
When will tax filing open in 2025?
Tax filing typically begins in late January, although the IRS has not yet announced when it will begin accepting all returns.
However, some taxpayers may begin filing IRS filings as early as January 10. Said On Tuesday. That's because its free file service will start accepting returns from Friday.
The IRS Free File program, offered through tax software companies, is available to taxpayers with adjusted gross income of $84,000 or less in 2024.
This is different from the IRS's relatively new service. direct file The service, which will be available in more than 20 states from Alaska to Wyoming this tax season.