This past year has been a struggle and test of perseverance for many of us. COVID has put our lives on hold and required a sacrifice of normalcy. Both businesses and employees suffered due to lost jobs, reduced hours, and permanent closures because of the loss of business income during the pandemic. Retail and residential landlords have lost rental income as a result. It’s easy to see how many things have changed since early 2020.
The IRS was no exception to this disruption of normalcy. The IRS was forced to close for multiple months during 2020 and the agents transitioned to working from home. With the closures, huge backlogs in mail processing, and phone and fax line issues, customer service declined rapidly at the IRS. As the US begins to move towards a pre-pandemic way of life, the IRS is being called to improve in multiple areas, mainly in customer service and implementing measures to prevent another serious in the future.
Many taxpayers and tax practitioners are acutely aware of how difficult it is to try to get ahold of the IRS. It has been reported by the National Taxpayer Advocate Service in their annual report (“Report”) to Congress that only 7% of taxpayers who called the IRS over the last year were able to reach an agent to get assistance. For example, when it came to 1040 returns, taxpayers made about 85 million calls to the IRS in the last year, but only 3% (or about 2,500,000) reached an agent. Many phone calls from taxpayers were to get updates on delayed or unprocessed paper tax returns and stimulus payments. According to the Report, as of June 2021, there are still about 16.5 to 17 million unprocessed paper tax returns.
To be fair, the IRS has been put under a lot of pressure during COVID. The Report highlighted and praised the IRS for processing most of the returns, sending out three rounds of stimulus checks in a timely manner, dealing with the extended tax seasons of 2020 and 2021, and adjusting to the influx of new tax laws from Congress. Tax laws have changed three times in the last 15 months, mostly geared to combat the economic effects of the pandemic. Yet the IRS was still able to process 136 million 1040 returns and issue 96 million refunds to the tune of about $270 billion during the 2021 filing season. The Report noted that this was on par with the figures from the 2019 filing season before the pandemic. Additionally, the three rounds of stimulus payments totaled about 475 million checks in the amount of $807 billion.
The Report noted that some of the main challenges faced by the IRS during the pandemic were staffing shortages, technology shortcomings, remote working, office closures, and unprocessed mail. These challenges caused longer delays in processing paper returns and longer hold times for phone calls. Approximately 15.8 million returns were suspended by the IRS during processing and required further review. About 2.7 million amended returns are still awaiting processing. These delays in processing and the inability to get assistance caused frustration among taxpayers and the tax professionals that were trying to help taxpayers.
INDIVIDUAL ONLINE ACCOUNTS CAN HELP
In response to the customer service issues at the IRS, the Taxpayer Advocate Service has offered some recommendations that they believe would help the customer service and help prevent extravagant backlogs in the future. One recommendation is improving the usefulness and expanding the functionality of the individual online accounts. These are online self-service options offered by the IRS that taxpayers can take advantage of in lieu of speaking with someone at the IRS. There is also Get Your Refund Status and Where’s My Amended Return access on the IRS.gov website. You can check the status at any time. The Virginia Department of Taxation has a similar tool on its website.
As an individual taxpayer, you can easily set up an online account on the IRS account that allows you to request and receive documents like transcripts from the IRS. It is secure and removes the need to call the IRS for such requests. You can go to the IRS.gov website and click on View Your Account on the home page and create your account from there by following the instructions on the screen.
For security purposes, the IRS requires taxpayers to verify their identity before allowing the account access. The taxpayer must match something on their credit report (i.e., a credit card number or loan number) with what the IRS has on file. Unfortunately, taxpayers can run into difficulty verifying their identity to create an account. Common issues include outdated IRS files that don’t match the taxpayer’s current information, or some old information that matches the IRS, but the taxpayer does not have access to that information anymore (like a refinanced loan).
The Taxpayer Advocate Service also recommends improving functionality by allowing tax practitioners access to the taxpayer’s online accounts for their clients and giving priority to the practitioners. While practitioners currently have some priority access lines, the current system is also clogged with the processing backlog and needs considerable improvement.
Another recommendation is to expand the customer callback technology to all phone line queues. The IRS only offers the callback option to some queues, but the high-volume queues and others do not currently have this option. The IRS did respond to this recommendation and noted that they are working to expand the callback from 5 lines to 16 lines in 2021, with additional expansions as funding becomes available.
The Report also requested that there would be fewer barriers to electronically file returns. Many forms on returns are not allowed for e-filing or some attached documents cause e-filing to not be permitted. Allowing more e-fillable returns will help with reducing the number of paper returns filed and less chance of backlog. Scanning technology was also recommended. The IRS can use this technology to scan paper returns that were prepared electronically so employees would not need to manually key in the data into the computer.
Another recommendation is for the IRS to expand the digital acceptance and transmission of documents and the use of digital signatures. Since the IRS offices were closed during multiple months of 2020, it was impossible for the IRS employees to receive paper files. In response, the IRS allowed employees to accept and transmit by email temporarily. Additionally, employees could temporarily accept images of signatures and digital signatures (instead of having to be actual freehand signatures). The Report recommends making these policies permanent.
As many of us continued to work during the pandemic, but worked remotely, video conferencing was widely used. The Report recommends that the IRS expand its use of videoconference technology to prevent the need for taxpayers to be physically present. Some IRS agencies use this technology already, but the expanded use to other IRS departments would help fill current or future voids in face-to-face service.
Along with expanded callback lines, the IRS has noted some other improvements that they are trying to roll out in response to the Report. The IRS plans to relaunch a pilot within their Web Service Delivery to provide face-to-face service virtually in early fiscal year 2021. Text chat has expanded to 11 of the 19 Automated Collection System call sites and allowing taxpayers to attach documents like installment agreements and delinquent returns. Lastly, the IRS is looking into changing the Economic Impact Payment line to include natural language capabilities to allow callers to self-route to get assistance to reduce the number of phone calls agents have received.
The pandemic has opened our eyes to our deficiencies in using technology to our advantage and has pushed technology to the forefront of the way to run a business. From remote employees, Zoom calls and being able to employ anyone around the world, technology allows us to adapt our business to this new world. The Taxpayer Advocate Service is just asking the IRS to adapt their business with the technology that is currently available to provide better service to their customers – US taxpayers.
David Mitchell, CPA