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Tax return backlog is ‘crushing the IRS’ as pileup exceeds 21 million


IRS Commissioner Chuck Rettig testifies before the Senate Finance Committee on April 7, 2022.

Kevin Dietsch | Getty Images News | Getty Images

The IRS backlog of tax returns has swelled over the past yr, despite efforts to clear the pileup, in line with an agency watchdog.

There have been 21.3 million unprocessed paper returns as of May 31, up from 20 million one yr prior, the Taxpayer Advocate Service shared in its mid-year report to Congress.

“Unfortunately, at this point the backlog continues to be crushing the IRS, its employees and, most significantly, taxpayers,” wrote National Taxpayer Advocate Erin Collins, who leads the independent organization inside the IRS.

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“That the backlog continues to grow is deeply concerning, primarily because tens of millions of taxpayers have been waiting six months or more to receive their refunds,” Collins added.

While greater than 90% of taxpayers filed returns electronically last yr, roughly 17 million sent paper filings, contributing to the backlog.

Over the past yr, refund delays for some paper-filed returns have exceeded six months, with many waiting 10 months or more, in line with the report.

Watchdog shares ‘missed opportunities’ for IRS

The report also highlights “missed opportunities” for the agency over the past yr after identifying issues with paper returns.

“Had the IRS taken steps a yr ago to reassign current employees to processing functions, it could have reduced the inventory backlog carried into this filing season and accelerated the payment of refunds to tens of millions of taxpayers,” Collins wrote.

Over the past 12 months, the agency can have boosted efficiency with recent scanning technology, or moved faster to make use of a part of the $1.5 billion funding from the American Rescue Plan of 2021 to rent recent employees, the report said.

CNBC has reached out to the IRS for comment.

IRS plans to rent more staff

The agency in March shared plans to rent 10,000 staff, starting with 5,000 recent employees. Nevertheless, the IRS hadn’t yet achieved half of the 5,000-worker headcount in May, in line with Ken Corbin, the agency’s chief taxpayer experience officer.

“We remain focused on doing every little thing possible to expedite processing of those tax returns, and we proceed so as to add more people to this effort as our hiring efforts proceed this summer,” IRS Commissioner Chuck Rettig said in a press release this week.

As of June 10, the IRS had processed around 4.5 million of the greater than 4.7 million individual paper returns from 2021, and the agency expects to finish error-free individual filings from 2021 this week.

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