The IRS and taxpayers face a number of obstacles before crossing the finish line in this year's longer-than-usual tax filing season.
The coronavirus prompted the IRS in March to extend the deadline for individuals to file their 2019 returns, and pay their 2019 taxes, from April 15 to July 15. In addition to processing returns during that time, the agency also had to implement COVID-19 relief measures passed by Congress in the spring.
The virus also caused the IRS in March to direct most of its employees to work remotely, bringing a halt to key agency functions that cannot be performed remotely. As it started to bring employees back to their worksites in recent weeks, workers faced a backlog of tax returns to process and taxpayers to assist.
“While we had to adjust and redeploy resources during the pandemic, our employees have remained dedicated to delivering the 2020 filing season,” IRS Commissioner Charles Rettig said during a Senate Finance Committee hearing on Tuesday.
Throughout the pandemic, the agency has processed electronic returns, issued refunds via direct deposit and accepted electronic payments, Rettig said. He added that as part of the agency’s phased reopening, employees are processing paper tax returns, responding to mail and reopening telephone lines.
“We are prioritizing refunds and customer service operations, as well as the health and safety of our employees and everyone that we interact with,” Rettig said.
The IRS announced Monday that it would not be further extending the July 15 deadlines for individuals to file and pay their 2019 taxes. The agency said that people who need extra time to file can request an extension to Oct. 15, and that people who cannot pay their taxes in full by July 15 can take advantage of a number of payment options.
Most people have already filed their tax returns, though the IRS has processed fewer returns and issued fewer refunds than it had at this point last year.
The IRS said Thursday that as of June 26, it had processed about 129 million returns, down 10.6 percent compared to the same period last year. As of June 26, it had issued about 94 million refunds, down 10.3 percent from this point in 2019.
Lawmakers and IRS watchdog groups are concerned about those slowdowns.
National Taxpayer Advocate Erin Collins — who leads an independent office within the IRS that helps taxpayers resolve problems with the agency — said in a report issued Monday that the IRS has estimated that as of May 16, it had a backlog of 4.7 million paper tax returns.
Collins said some taxpayers have experienced delays in getting their refunds because they were mistakenly flagged by IRS filters, and the agency has not yet processed many taxpayers’ mailed responses in which they substantiate their claims. She said that some of those delays have occurred for taxpayers who claim the earned income tax credit (EITC) and child tax credit: two tax breaks for low- and middle-income families.
Senate Finance Committee Chairman Chuck GrassleyChuck GrassleyFormer Sen. Bob Dole dies at 98 Alarm grows over smash-and-grab robberies amid holiday season GOP blocks bill to expand gun background checks after Michigan school shooting MORE (R-Iowa) asked Rettig during Tuesday’s hearing about the backlog of returns claiming the EITC, as well as the mail backlog.
“How long do you expect it to take for the IRS to address the backlog and are there procedures in place to prioritize certain types of correspondence, such as tax returns and audit requests?” Grassley asked.
Rettig called the EITC returns “an extreme priority,” and that the agency expects to address those returns as quickly as it can.
He estimated the agency’s total mail backlog at about 12.3 million pieces of correspondence. As the agency goes through its mail, he said, it is prioritizing paper tax returns. He added that many of those paper returns may claim refunds connected to the EITC.
Senators also pressed Rettig about the reopening of IRS facilities across the country.
Rettig said that all of the agency’s processing facilities and call centers will be open by mid-July, with employees socially distanced, and that taxpayer assistance centers should also be open by mid-July. Rettig also said in his written statement that the IRS has had more than 50,000 employees teleworking, and that they’ll continue to work remotely for the time being.
The IRS has worked closely on reopening with the National Treasury Employees Union (NTEU), which represents agency employees, Rettig said.
NTEU President Tony Reardon told The Hill that employees are worried about returning to their offices, saying he’s heard reports of some work sites not having enough hand sanitizer or not strictly enforcing social-distancing policies.
“My members are extraordinarily concerned, and anxious, about having to come back into the workplace,” he said.
Reardon also issued a statement calling for the closure of the IRS service center in Austin, Texas, saying coronavirus cases have been rising in the area and that there have been 29 positive coronavirus cases among IRS employees at that site since June 1.
Texas officials announced nearly 7,000 new cases of COVID-19 on Tuesday, breaking the state's record for the total number of confirmed cases in one day. On Thursday, Gov. Greg Abbott (R) issued an order making it mandatory for all Texans to wear a face covering of some kind while out in public.
The IRS said in a statement that “while there are increases in cases for the IRS in Texas, these cases are correlating to the state’s increased testing and trace capabilities.”
“The IRS emphasizes the majority of the uptick in positive case notifications are employees who have been out of the workplace for extended periods, in some instances since mid-March. These are not necessarily related to the IRS reopening,” the agency said. “We continue to closely watch the situation. The safety of our employees and taxpayers remains a top priority.”
Since employees have started to return to their worksites, the IRS has started to send out collection notices that have drawn concerns from lawmakers and IRS watchdogs.
The agency has been sending some notices, printed prior to coronavirus-related closures, with due dates that have since passed, along with inserts that give updated due date information. Some of these notices were sent to taxpayers about balances due for their 2019 taxes, even though those payments are not due until July 15.
The IRS said in a statement that it is sending the original notices along with inserts, rather than issuing updated notices, because of the amount of time it would take reprogram systems and generate new notices. IRS management has said it sent notices to people about their 2019 taxes in an effort to fulfill a requirement to send notices to taxpayers before starting an enforcement action.
But lawmakers and watchdogs are concerned that taxpayers will be confused when receiving the original notices with inserts.
“The receipt of a notice with incorrect and conflicting dates is likely to cause unnecessary confusion for many taxpayers,” House Ways and Means Committee Chairman Richard NealRichard Edmund NealGOP fears boomerang as threat of government shutdown grows House passes giant social policy and climate measure The Hill's Morning Report - Presented by ExxonMobil - House to vote on Biden social spending bill after McCarthy delay MORE (D-Mass.) and Rep. John LewisJohn LewisDole to lie in state in Capitol Rotunda Democratic frustration growing over stagnating voting rights bills With extreme gerrymanders locking in, Biden needs to make democracy preservation job one MORE (D-Ga.), chairman of the Ways and Means oversight subcommittee, said in a letter to the IRS last month.
While the IRS is working to finish this year’s filing season, it is also already starting to think about the next one.
The agency has said that people who didn’t receive the full coronavirus stimulus payment to which they are entitled can claim it on the 2020 tax returns they file next year. Lawmakers are hoping that the IRS takes steps to ensure that taxpayers won’t have to wait until next year to get their full payments.
“With a record number of Americans newly unemployed or facing financial insecurity, it would be irresponsible to further delay emergency assistance that Americans desperately need now,” Neal and Lewis said Wednesday in a letter to Rettig.