The Taxpayer Advocate Service (TAS) is wrestling with a backlog of cases as it deals with an increased amount of requests for assistance due to severe delays at the Internal Revenue Service (IRS).
The TAS is an independent organization within the IRS and its job is to assist taxpayers with resolution of those problems that taxpayers are unable to resolve with the IRS. In a blog post last week, Erin Collins, the National Taxpayer Advocate, said that TAS is expected to receive more than 253,000 cases in 2021—a more than 50% increase from fiscal year 2017. The growing caseload is exacerbated by the declining number of employees. Due to budgetary constraints, TAS ended the first half of 2021 with approximately 10% fewer employees when compared to 2017. TAS is also grasping to handle more than 20,000 phone calls each week. On average, taxpayers are on hold for 80 minutes to speak to an intake advocate.
The organization implores Congress to increase funding for both the IRS and TAS. The organization reported that delays at the IRS trickledown to TAS because the organization collaborates with the IRS’ business units to resolve cases. Also, delays in processing taxpayers’ amended or original tax returns and refund claims add to the volume of cases that taxpayers seek TAS assistance to expedite.
In addition, taxpayer problems with net operating loss carryback claims have significantly increased and become a major subject area contributing to TAS’s increased workload. By statute, the IRS has 90 days to process tentative carryback claims (Forms 1139 for businesses and Forms 1045 for individuals and Trusts). However, Government Accountability Office (GAO) reports that as of May 20, 2021, the average time for processing such claims was 154 days, significantly exceeding the statutory limit. The delay is due to IRS facilities operating at reduced capacity to accommodate social distancing guidelines.
The same GAO report states that at the end of the 2021 tax filing season, the IRS had approximately 25.5 million unprocessed returns, including 1.2 million returns from its 2020 tax season. As a result, taxpayers are experiencing delays in obtaining status updates about their tax returns and tax refunds. Thus, more taxpayers are turning to TAS for assistance, which causes considerable delays with responses at the organization.
TAS accepts cases that fall into one of the four categories:
- ‘Economic burden’ cases that involve financial burden to the taxpayer. These are those situations where the taxpayer is suffering or will suffer economic harm; the taxpayer is facing an adverse action; the taxpayer will incur significant cost or suffer irreparable injury if relief is not granted. I.R.M 184.108.40.206.1 (02-04-2015);
- ‘Systemic burden’ cases that involve the failure of the IRS system, process, or procedure. As a result, the IRS fails to timely resolve the taxpayer issue. These cases usually entail the taxpayer not receiving a response or a resolution by the date promised or the taxpayer is experiencing more than 30 days delay regarding a tax account problem. I.R.M 220.127.116.11.2 (02-04-2015);
- The ‘best interest of the taxpayer’ cases I.R.M 18.104.22.168.3 (02-04-2015). TAS will accept cases to ensure the taxpayers are provided a fair and equitable treatment. This category should only be used when the case does not fit into any other categories; and
- The ‘Public policy’ cases. These are the cases that have compelling public policies to warrant assistance from TAS. I.R.M 22.214.171.124.4 (02-04-2015).
Taxpayers should expect significant delays when contacting Taxpayer Advocate Service for assistance with their tax issues. For questions about this alert or any other tax controversy questions, please contact a member of RSM’s Tax Controversy Team.