At the end of 2022, The Internal Revenue Service reported they received more than $4.9 trillion in tax revenue for fiscal year 2022, and distributed $642 billion in federal tax refunds and other outlays. However, a separate report found continuing problems with taxpayer service, tax refund delays, and backlogs of unprocessed returns that the IRS plans to address this next filing season.
In the most recent report, the IRS has maintained a clean, unmodified financial statement audit opinion for the 23rd consecutive year. It is noted that the recently passed Inflation Reduction Act of 2022 will provide nearly $80 billion to the IRS through fiscal year 2031 for increased enforcement, investments in information technology modernization, and improvements to taxpayer services. The extra $80 billion in funding should help improve its taxpayer service, which has been lagging after a series of budget cuts over the years combined with increased strains from changes in tax laws and requirements for distributing multiple rounds of Economic Impact Payments and monthly payments of enhanced child tax credits to taxpayers during the pandemic.
A separate report released by the Government Accountability Office found that backlogs and ongoing hiring challenges at the IRS led to poor customer service and tax refund delays. The report noted the institution has struggled with a work backlog for three years. During the 2022 filing season, the agency focused on reducing its correspondence backlog, but that left most phone calls from taxpayers unanswered. At the end of last year, the backlog was approximately 10.5 million paper returns and returns that had been stopped for errors. The IRS addressed its backlog of 2021 paper returns, but as of late September 2022, still had about 12.4 million returns to process, resulting in tax refund delays for millions of taxpayers.
From January to September 2022, the IRS reduced its prior-year backlog of taxpayer correspondence from about 5 million to about 400,000 pieces. The IRS used a combination of strategies to work through this inventory of unanswered correspondence, including reassigning staff from answering phones to processing correspondence. However, less than one in five calls were answered during the filing season. As of September 2022, the IRS met its hiring goals for fiscal year 2022 thanks to a combination of direct and traditional hiring. The IRS's direct hire authority enables it to make on-the-spot job offers to applicants. However, this authority did not begin until a month after the filing season began. As a result, about 95% of direct hires did not start working until after the 2022 filing season ended. Officials said their recent hiring efforts will help prepare the agency for a strong 2023 filing season, according to the report.
Talley’s team of tax professionals provide comprehensive tax compliance and consulting services so you can preserve, enhance, and pass on your assets and wealth to the next generation. We welcome the opportunity to discuss the current options available for you. For more information, contact us today.