Things are getting better at the Internal Revenue Service, according to National Taxpayer Advocate Erin Collins — but there's still some way to go.
"This filing season has been as close to normal as possible," she told an audience of accountants and tax professionals at the American Institute of CPAs' Engage Conference, being held this week in Las Vegas. "But they still have a huge backlog with amended returns. They also have problems with correspondence — that has been delayed. They're back to four- to six- to eight-week processing for paper returns."
"Paper is a problem for the IRS — they don't have the resources to quickly deal with it," she continued.
That's reflected in some of the statistics she shared on the tax returns and correspondence that are backlogged at the agency, including at last count:
- 3.7 million amended returns;
- 6.8 million other returns that are "in suspense" — they're missing a form or a signature or are what she described as "otherwise unpostable;" and,
- 5.3 million pieces of correspondence.
The service is still recovering from COVID in many ways, she noted — as is her own organization, the Taxpayer Advocate Service.
"Historically, our case advocates would have 60 to 80 cases open at once, but at the height of the pandemic, they had over 200 each — that's why they weren't able to get back to taxpayers as quickly," she explained. Those taxpayer reps now have between 100 and 125 cases open, which is still too high, but at least it's headed in the right direction.
They are also still hampered in their ability to resolve taxpayer cases on a timely basis, Collins said: Where it used to take 60 to 90 days to close a case, it's now more like 12 months.
"Our reps don't have authority — they have to make recommendations to the IRS," she explained. "We rely on our IRS compadres to fix things, and they've been having problems."
The service's recently released Strategic Operating Plan proposes a lot of steps to both dig it out of the hole it fell into during the pandemic, and to significantly improve taxpayer service.
"Fingers crossed that the IRS is going to be able to implement a lot of these," said Collins. "Some of them are simple — answering the phones, for instance. You'd think that would be easy, but it's not easy for the IRS."
Among other things, in the short term any initiatives involve prioritizing resources that are currently scarce. For instance, the IRS has said that it answered 90% of calls within four to five minutes during tax season — but that required a tradeoff.
"The challenge is — 'Yay, we're answering the phones' — but it came at a cost," Collins said. "One of the things the customer service reps do in their downtime is process paper — correspondence and amended returns. If you're answering the phones 80-90% of the time, guess what you're not doing? Processing paper. And we're now back to a backlog of paper correspondence and amended returns like a year ago."
The money set aside for the IRS in the Inflation Reduction Act should help, though Collins noted that last week's debt ceiling deal had reduced the amount from $80 billion to $58 billion, and not all of that will be spent where she'd like it to be.
"I'd like every dollar of the IRA money to go to the taxpayer service and IT areas," she said. "I believe if we fix our IT, that's going to make a huge difference."
Fixing the agency's technology, she acknowledged, is far easier said than done. For instance, there are still 1,100 tax forms that are not compatible with e-filing. "That's bizarre to me," she said. "One goal of IRS funding is to get 80% of those compatible immediately — I don't know what the definition of 'immediately' is, but hopefully it's soon."
She went on, "I'll try to say this with a straight face: The IRS will be paperless by 2025. What that means is that at point of entry, it will be scanned and go through the system electronically. We're not going to tell taxpayers they can't use paper."
"We have 60 to 70 legacy systems," she noted. "We need to collapse that into one, and then we can be paperless. If they can pull it off, we're all going to be happy campers in five years."
Calling for help from tax pros
One area of technology Collins would like to see implemented is greater visibility for tax pros into their clients' tax situation.
"I am a strong believer that if practitioners had one portal they could go to and see all their clients in one place, that would be a game-changer," she said. "That to me is incredibly important."
She would also like to see more input from tax pros in general, calling on the audience at Engage to use the NTA's
"Go online and tell us, 'Hey, I'm seeing a pattern,'" she urged.
Having worked in tax at Big Four firm KPMG for two decades, she came to the NTA with her own store of issues to resolve — but her supply of those is not unlimited: "I'm going to run out of my personal knowledge of 'oopses' — please feel free to share your knowledge."
"As you see these kinds of issues, please reach out to our office — a lot of times, it's just an IT glitch, and the IRS won't say no; it's just a time issue to get it fixed," she said.
Another area where both the IRS and the Taxpayer Advocate Service can use help from tax pros is in staffing.
"The IRS's biggest problem is that it's looking at huge turnover over the next three to five years," she said. "A massive amount of employees are eligible to retire today."
She then launched into a pitch for the assembled tax pros to consider working at the agency that was only slightly tongue in cheek.
"You are what the IRS needs — people who know what they're doing. You're not going to bring someone in from college and say, 'Go audit Bill Gates.' We need experienced people to come in and give back (and not necessarily be there for a paycheck ...)," she said. "So if you want to give back, and you want to feel good about what you're doing, and you don't want to have billables and to have to track your time — we're hiring!" she said.
