Exploring the Impact of Paper Processing Delays on Taxpayers: Analysis of the 2023 National Taxpayer Advocate’s Report Including IRS Insights

The recently released 2023 Annual Report by National Taxpayer Advocate Erin M. Collins sheds light on the Internal Revenue Service’s (IRS) significant strides in improving taxpayer services and the challenges it continues to face, particularly in paper processing. As taxpayers navigate the intricacies of tax filings, the report identifies critical areas where the IRS has excelled and offers recommendations for addressing ongoing challenges.

Successes and Improvements:

Collins commended substantial progress in enhancing taxpayer services, particularly during the challenging times brought about by the COVID-19 pandemic. The agency virtually eliminated its backlog of unprocessed individual income tax returns and significantly improved telephone service, demonstrating resilience and adaptability.

Challenges in Paper Processing:

Despite these achievements, the report highlights paper processing as a persistent weakness. Delays in processing amended tax returns (Forms 1040-X), amended business tax returns, and taxpayer correspondence have become pronounced. The backlog of unprocessed amended returns has surged from 0.5 million in 2019 to 1.9 million in October 2023, raising concerns about delays in issuing refunds and potential negative impacts on taxpayers. If you want to automate manual tax resolution tasks like client data entry looking up industry standards, calculating asset value, and form generation, then visit MyCase for more information.

Identity Theft Victims Assistance (IDTVA) Unit Challenges:

One of the most alarming issues identified in the report is the extraordinary delays in assisting victims of identity theft. Nearly half a million taxpayers with cases pending in the IDTVA unit were waiting an average of almost 19 months for resolution. This delay is particularly critical for low-income taxpayers who rely on tax refunds, with Collins emphasizing the urgency to prioritize and expedite resolving identity theft cases.

Telephone Assistance and Employee Productivity:

The report draws attention to the challenges in balancing telephone assistance and paper processing, as, in its efforts to improve telephone service, it prioritized answering calls over processing amended returns and correspondence. The decision led to unproductive employee time, with customer service representatives spending a significant portion of their time waiting for calls during the 2023 filing season. Collins suggests finding a more flexible approach to employee allocation between phone answering and paper processing.

Administrative Recommendations:

To address these challenges, the National Taxpayer Advocate provides several administrative recommendations. Among them is prioritizing improving online accounts, enhancing the ability to attract and retain qualified employees, and upgrading the “Document Upload Tool” back end to fully automate the processing of taxpayer correspondence. Learn more about the important of professional help regarding tax resolution here.

Legislative Recommendations – The “Purple Book”:

The 2024 Purple Book, comprising 66 legislative recommendations, aims to strengthen taxpayer rights and improve tax administration. Recommendations include:

• Requiring the IRS to process claims for credit or refund on time.
• Authorizing the establishment of minimum standards for paid tax return preparers.
• Expanding the U.S. Tax Court’s jurisdiction to adjudicate refund cases.

Conclusion:

The National Taxpayer Advocate’s 2023 report comprehensively overviews the IRS’s successes and challenges. While acknowledging the strides made in improving taxpayer services, the report underscores the critical need to address paper processing delays, resolve identity theft, and enhance overall efficiency. As policymakers and the IRS consider the recommendations, taxpayers await further developments impacting their interactions with the tax system in the coming years.