The Internal Revenue Service announced that it is on track to complete processing of originally filed and error-free paper Forms 1040 received in 2021, by the end of this week. Shortly thereafter, the IRS will continue to process business paper returns filed in 2021, and the remaining individual tax returns filed in 2021 containing processing issues that may require additional information.
Pandemic-related issues and staffing shortages have strained IRS resources, with 2022 beginning inventory consisting of a higher-than-normal amount of filed paper tax returns and correspondence from 2021.
To address the remaining unprocessed inventory, the agency has implemented unprecedented efforts, including staff working overtime, creating teams solely focused on processing aged inventory, and direct hiring of new workers and contractors. In addition, the IRS has implemented new technology where an IRS tax examiner can correct 180 to 240 returns per hour compared to the prior average of 70 returns last filing season.
IRS Commissioner Chuck Rettig stated that the IRS is “focused on doing everything possible to expedite processing of these tax returns, and we continue to add more people to this effort as our hiring efforts continue this summer.” Increased agency funding is also hopeful as “long-term and consistent funding for the agency is critical to ensuring the IRS is prepared for future tax seasons”. This will aid the agency in adding “more employees to process tax returns and answer phones as well as help improve technology and ensure fair enforcement of the tax laws”, Rettig said.
Despite facing these challenges, the IRS processed most of the individual paper returns received in 2021—more than 4.5 million of the greater than 4.7 million as of June 10. Many tax returns filed in 2022 have also been processed, with approximately 98 million refunds generated from the more than 143 million returns processed. The IRS is encouraging taxpayers with extensions to file until Oct. 17, 2022, not to wait until the last minute.
Takeaway
Taxpayers should file sooner rather than later if they have not filed their 2021 tax returns yet. An error-free electronically filed return with direct deposit is typically processed in 21 days, but there could be potential delays when a return is filed close to a filing deadline or file paper returns.
