IRS BACKLOG UPDATE IV

[Lee B]

Copied from The Taxpayer Advocate Blog:

"But the 2021 Filing Season Has Been Challenging At Best

Some additional complexities this year necessitated manual reconciliation of returns, slowing down processing times. For example, any inconsistencies between the IRS’s records for the EIP and the recovery rebate credit (RRC) reflected on a taxpayer’s 2020 Form 1040 or Form 1040-SR, U.S. Tax Return for Seniors, require manual review and corrections before processing. A manual review of a tax return is also required if the taxpayer elected the 2019 “income lookback” to calculate the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC). More specifically, the Consolidated Appropriations Act, 2021, signed into law on December 27, 2020, included a lookback rule allowing taxpayers to elect to use their 2019 income for the purpose of calculating their EITC or ACTC on their 2020 tax return.

Due to the late passage of the law, the IRS was unable to timely adjust its forms and computer systems before the start of the filing season to allow for systemic processing of returns where taxpayers elected to use 2019 income. Thus, the IRS had to create a manual process instead. Any corrections to the RRC or verification of the 2019 lookback election is being manually processed by IRS’s Error Resolution System (ERS) unit, and the IRS is placing the associated return in “suspense” until an IRS employee can review it to verify the 2019 income or the prior EIP. Essentially, the return is in a queue waiting to be reviewed and processed, and during this time, it is not evident on IRS systems why the return is being held.

Holding returns has resulted in a significant increase in ERS inventory and delays in taxpayer refunds. As of the week ending April 9, 2021, more than eight million individual returns (Form 1040 or 1040-SR) were in suspense status awaiting review and manual processing. For context, during a normal filing season when the ERS unit is fully operational, it does not suspend returns, as it is able to review and process them as they come in.

In addition to the eight million returns of individuals in the IRS ERS unit, there are millions of other returns in other IRS units also awaiting manual processing:

5.3 million individual 2019 and 2020 paper returns;

4.7 million individual returns with processing errors or fraud identification issues requiring responses from taxpayers; and

11 million business and other returns.

In total, the IRS is now holding over 29 million returns for manual processing. As one would expect, IRS employees are stretched thin working through the manual processing of these returns, so if a taxpayer’s return is pulled for manual processing, there will be delays."

[TAXMAN]

I am still wondering how many 2016,2017,2018 returns are in the hopper waiting. I know I have several.

[Lee B]

11 hours ago, TAXMAN said:

I am still wondering how many 2016,2017,2018 returns are in the hopper waiting. I know I have several.

You have 2016 and 2017 returns that you are waiting on?

[Possi]

Government crippling itself, let alone the collateral damage done to tax pros.

[Lion EA]

I have a couple clients who come in every three years. Luckily, they came in prior to the pandemic, or else some of their returns would be sitting with millions of other returns. And, a woman who'd been out of the country, house broken into, severe illness, and eye surgery so she can see again now brought in some old years. I'm holding the ones that need paper filing. 29 million!

[Max W]

29 million returns that have to be processed by hand!!!  How many mistakes are going to be made by the IRS?  The system is broken.  And guess who the clients are going to blame?

[JohnH]

Look at the bright side. At least the SOL is running on all those returns sitting in trailers.

[FDNY]

44 minutes ago, JohnH said:

Look at the bright side. At least the SOL is running on all those returns sitting in trailers.

I love this, what a great thought!

[Randall]

On 4/24/2021 at 1:01 PM, Possi said:

Government crippling itself

I agree.