IRS had backlog of 12 million paper returns by Christmas, says

The IRS had a backlog of almost 12 million paper tax returns from individuals and businesses as of Christmas, according to a report from the Treasury Inspector General for Tax Administration.

As a result, many taxpayers may not have gotten refunds owed from last year’s filing season, the watchdog said in its briefing, which was publicly released Wednesday.

The Covid pandemic hobbled the agency’s ability to receive, sort, distribute and process paper tax returns, according to the report and agency officials.

Much of that process, which requires manual entry of data from tax returns, for example, isn’t conducive to telework, they said.

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“In 2020, the IRS found itself in uncharted waters, as did the entire nation,” Kenneth Corbin, commissioner of the wage and investment division at the IRS, wrote in response to the findings.

“The Covid-19 pandemic presented some of the greatest challenges to the IRS in its history, both in terms of being able to carry out our mission and in protecting the health and safety of taxpayers and our own workforce,” he added.

Corbin also urged taxpayers to file an electronic tax return this year, given persistent backlogs.

“We are hopeful the benefits of electronic filing have been reinforced with the public and that the experience of 2020 encourages traditional paper return filers to convert to electronic filing,” he said in his response, dated March 8.

Now, $1,400 stimulus checks and insufficient staffing may hamper the tax collector’s ability to quickly address the backlog as this year’s tax season is underway, according to the report. Last week, the IRS extended the filing season to May 17 from April 15.

This may delay refunds and some stimulus payments for individuals, the report said.

“Of particular concern is the continued challenges in hiring sufficient staff needed to both continue to work backlog inventory and process Tax Year 2020 tax returns at the same time,” it said. “This could further affect taxpayers awaiting refunds and additional Recovery Rebate Credits associated with these Tax Year 2020 returns.”

The IRS temporarily scaled back operations due to the pandemic by closing Submission Processing and Taxpayer Assistance Centers, discontinuing face-to-face operations and suspending telephone help lines, Corbin said.

Closing Submission Processing Centers hindered the agency’s ability to process…