At the end of 2019, the Internal Revenue Service had 239,285 unprocessed paper-filed business tax returns; at the end of 2020, that number had jumped to 7.9 million — and that was just one of the negative impacts on business filings brought about by the COVID-19 pandemic, according to a new report.
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TIGTA also noted that systemic payment processing limitations also caused problems: IRS systems can only process payments received within the last 30 days, but when TPCs were reopened in June 2020, many payments already exceeded that limit, and the IRS did not revise that limit until October 2020 – because it did not realize that it could.
"The backlog of returns, correspondence, and other types of work resulting from the pandemic has and will continue to have a significant impact on the associated business taxpayers," the report indicated.
The report suggested that the backlog could have been reduced by have more payments redirected to IRS lockbox sites; most payments already do, but over 6.9 million payments worth more than $37.6 billion went through TPCs in 2020.
TIGTA recommended that the commissioner of the IRS Wage and Investment Division correct the inappropriate penalties, and look into the possibility of sending more payments to lockbox sites.
The IRS agreed with both recommendations, and said that it had begun making corrections to the incorrect penalties, and had updated its lockboxes to be able to process additional notices. It did note, however, that it would not be possible for payments received in field offices to be directed to lockbox sites.
