The IRS has 21 million unprocessed tax returns. This is how it affects refunds

Due to the large amount of accumulated work, the Internal Revenue Service (IRS, for its acronym in English) has more than 21 million tax returns still pending processing, an agency watchdog revealed.

This implies that taxpayers will have to wait longer for their refunds, if applicable, in the midst of an inflationary context that takes away the value of money. 

The backlog comes after years of budget cuts, a lack of staff and advanced technology, and after office closures due to the pandemic, coupled with extra work to send out stimulus checks. 

The most affected are those who send their returns by mail, something that is usually done largely by older people and those who cannot file an electronic return or do not know how. 

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As of May 31, there were still 21.3 million unprocessed paper returns, the IRS watchdog Taxpayer Advocate Service reported in its midyear report to Congress.

In 2021, for the same date, there were 20 million. 

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June 15, 202201:54

“It is deeply concerning that the backlog continues to grow, primarily because

,” wrote National Taxpayer Advocate Erin Collins, who heads the independent organization within the IRS.

Collins estimated that nine million taxpayers were experiencing refund delays.

And more than 300,000 who have been victims of identity theft will have to wait at least a year.

The IRS disputed the findings, saying the most recent data, through June 10, showed unprocessed returns had fallen below 20 million and were down slightly compared to 2021.

"The IRS is committed to having inventories in good shape by the end of this year and continues to make great progress in handling unprocessed tax returns," IRS spokeswoman Jodie Reynolds said in a statement.

He also pointed out that the data presented in the report to Congress "are not the most accurate or the most recent figures."

The agency is processing more returns compared to a year ago, she said.

The jam of paper declarations

Paper tax returns exacerbate delays at the agency as documents must be manually transcribed into their outdated computer systems.

While some choose to file on paper, there are others who have no choice either because they must submit a document that the IRS only accepts on paper or because they do not have access to the technology or information to do so electronically. 

The Treasury Department, which oversees the IRS, said in a letter to lawmakers Tuesday that the agency faces a larger-than-normal backlog at this point in tax season.

The IRS started the year with 8 million unprocessed 2021 returns, it said (most of them on paper).

The Taxpayer Advocate Service report agrees on this point: more than 90% of taxpayers used the electronic return last year, but approximately 17 million did so on paper, which contributed to the backlog. 

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April 18, 202201:36

Before the pandemic, the IRS typically delivered refunds to paper taxpayers within four to six weeks.

Over the past year, delays in refunds for paper-filed returns have generally exceeded six months, with delays of 10 months or more common for many taxpayers, according to the report. 

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“Particularly for low-income taxpayers who receive benefits from the Earned Income Tax Credit, tax refunds can make up a significant percentage of your household income for the year,” the advocate noted. 

Missed opportunities for improvement

The report also highlights "missed opportunities" for the agency over the past year after identifying problems with paper returns. 

“Had the IRS taken action a year ago to reassign current employees to processing functions, it could have reduced inventory backlogs this filing season and expedited the payment of refunds to millions of taxpayers,” Collins wrote. 

In the past year, the agency may have increased efficiency with new scanning technology, or moved faster to use some of the $1.5 billion in funding it received from the 2021 American Rescue Plan to hire new employees, the report said.

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The administration of President Joe Biden has been asking for more resources for the IRS ($80 billion over a decade to overhaul its technology and beef up its staff), and Democrats have blamed the agency's problems on Republicans, who have long have long tried to deprive it of funds. 

The taxpayer advocate suggested that the IRS work to automate the processing of paper returns and make it easier for taxpayers to file electronically.

Ensuring phones are answered should also be a priority.

Should be fixed before December

The IRS reported that as of June 10, it had processed the majority of 2022 filings (more than 143 million returns) and issued nearly 98 million refunds worth $298 billion.

However, it still faces more than twice as many unprocessed tax returns compared to a typical year, the agency said.

As for last year's outstanding, the IRS had completed about 4.5 million of the more than 4.7 million outstanding 2021 paper individual returns to date, and the agency expects to finish error-free individual returns this week, the IRS said. Tuesday. 

The IRS said you expect to finish your tax returns from last season by the end of June. Mark Lennihan / AP

The agency expects to soon finish processing all error-free individual tax returns received last year, the Treasury Department said.

A senior Treasury official noted that the IRS was already ramping up hiring and had diverted employees to help clear the backlog.

In March, the agency said it intended to hire 10,000 employees next year and planned to make about half of those hires in the following months.

The backlog should be resolved "absolutely" by December, IRS Commissioner Chuck Rettig said at the time, appearing before the House Ways and Means Committee.