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IRS Backlog: What You Should Know

Not even two months into the 2022 tax season, the IRS is backed up with unprocessed filings from 2021. Millions of returns, including business and payroll tax returns, haven’t been processed, and the IRS is unable to provide a timeline for when they will be. We thought it was important to update you on this issue and how it might affect your business.

What’s the hold-up?

The IRS is no exception to COVID woes. The agency is experiencing staffing and funding issues while also having more work than it can handle. These simultaneously occurring problems have resulted in a huge backlog from prior years, including returns, refund requests, and even basic correspondence. Due to staffing issues, taxpayers have had extreme difficulties getting through to the agency on the phone.

Funding issues may be one of the biggest reasons for this hold-up. Over the past ten years, the IRS budget has decreased by about 20%—all while the number of tax returns filed has increased by 13%. On top of that, the agency’s technology is the oldest system in the federal government, according to the Taxpayer Advocate Service.

Beyond its normal tax duties, the IRS has also been responsible for dispensing COVID relief payments over the past two years, driving up its workload at a time when it’s stretched thin enough. Sustained funding changes are needed. The Biden administration’s proposed bill, Build Back Better Act, would provide the IRS $80 billion over the next ten years; however, the bill’s future is not secure.

What can I do to avoid delays?

We say it every tax season: file early and file electronically. Most of the backlog is from mailed returns, so the IRS is pushing for everyone to file electronically. It’s fast and easy, and it will ensure your return is processed as quickly as possible. Right now, for returns already e-filed, refunds are expected to hit accounts by March 1st. The IRS also says to make sure you have all your documents together when you start your return. This will ensure you fill it out as accurately as possible, reducing the need for amendments.

If you need help with your business tax returns, call us today to learn how SDA can help you.

-Stanley & Kelly