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IRS Still Working On Millions of Unprocessed Tax Returns

In the Internal Revenue Service’s latest update on the status of its mission-critical operations during COVID-19, they reported that they still have 4.4 million unprocessed returns filed as of October 28th. This includes late filed returns from the prior year; 1.9 million of the unprocessed returns require error correction or some other form of special handling, and 2.5 million are still waiting to be reviewed and processed.

What’s the Issue?

It is mainly amended returns that are holding up the backlog at the IRS and tax returns that indicate pandemic-related benefits like expanded unemployment insurance and employee retention credits, which have changed rules and thresholds and have been exploited in some cases by criminals and fraudsters. Thousands of IRS employees are also needed as more of their long-tenured workers retire. “I look at the numbers and see millions of taxpayers that are still waiting for their returns to be processed,” wrote National Taxpayer Advocate Erin Collins in a blog post this past Thursday.

It was noted that as of October 21st, the IRS had around 3 million individual returns and over 4 million business returns still in the initial processing stage, as well as another 2 million amended individual and business returns.

IRS Funding Hasn’t Hit Yet

As part of the Inflation Reduction Act passed in August, the IRS will receive an additional $80 billion in funding over the next 10 years. In addition to hiring new taxpayer service employees, the funds are supposed to be used to upgrade the IRS’ aging technology and increase audits and enforcement of taxpayers, especially wealthy and corporate taxpayers. The uncertain makeup of Congress after the midterm elections on Tuesday means the IRS may not see that extra funding, though, since some Republican legislators expressed concerns about the agency pursuing middle-class taxpayers aggressively and want to add more restrictions on how the money can be used.

Wrap Up

The Inflation Reduction Act, which gave the agency a significant boost in funding being delayed seems to be hindering the IRS’ ability to solve a lot of these issues that are going on with the unprocessed returns. Hopefully, the agency gets everything sorted out before the 2023 tax season.

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