Newsletters

IRS Has Made Little Progress On Amended Return Backlog, NTA Reports, IR-2023-119

The Internal Revenue Service has made progress on clearing out the backlog of paper original returns in the wake of the COVID-19 pandemic, but the backlog of unprocessed amended returns remains an issue for the agency, National Taxpayer Advocate Erin Collins reported.

In the NTA Objectives Report to Congress for Fiscal Year 2024, released June 21, 2023, Collins reported that as of April 22, 2023, there were 2.6 million unprocessed paper tax returns, down from 13.3 million unprocessed paper returns from the same date one year earlier.

“The IRS caught up in processing paper-filed original Forms 1040 for individuals and various business returns; refunds were generally issued quickly; and taxpayers calling the IRS were much more likely to get through – and with substantially shorter wait times,” Collins reported. “Overall, the difference between the 2022 filing season and the 2023 filing season was like night and day.”

However, for those who have filed amended returns, the backlog numbers tell a different story.

The backlog of unprocessed amended paper tax returns on April 22, 2023, was 3.4 million returns, down only 200,000 returns from the same date one year ago. Part of the delay stems from the fact that while the IRS accepts amended individual returns (Forms 1040-X) electronically, the agency processes the forms manually.

“This creates delays in both data intake and the issuance of refunds,” Collins stated. “As of the end of the filing season, it was taking the IRS about seven months to process Forms 1040-X.” She attributed the ongoing backlog of amended individual returns to the agency’s prioritization of telephone customer support over paper processing.

On the business side, delays were attributed to processing of amended returns with Employee Retention Credit claims and the amount of fraud the ERC claims have generated.

“The influx of fraudulent claims has put the IRS between a rock and a hard place,” Collins wrote. “If the IRS pays out claims quickly without taking the time to review them individually, it will be making some payments to individuals potentially engaged in fraud. If it takes the time to review claims individually, legitimate businesses who need the funds Congress authorized to help them say afloat may not receive them in time.”

Another area where a backlog persists is in the amount of unprocessed taxpayer correspondence and accounts management cases, with the backlog dropping to 5 million on April 22, 2023, from 5.3 million on April 22, 2022.

“Because of the Treasury Department’s decision to prioritize telephone service over paper processing, the IRS has not made much progress in reduction its AM inventories over the past year,” Collins noted, adding that for victims of identity theft, “the delays have been particularly long and frustrating. The average cycle time for Identity Theft Victim Assistance cases closed in April 2023 was 436 days – nearly 15 months. That’s about three months longer than the 362-day cycle time in April 2022”.

The report also highlighted other issues that the agency needs to address. Collins identified two areas where the agency needs to provide clear and timely guidance – the federal tax treatment of special state tax refunds or payments in more than 20 state and Form 1099-K reporting requirements.

By Gregory Twachtman, Washington News Editor

FL - Solid mineral tax rates for 2024 announced

Florida has released the severance tax rates on the production of heavy minerals and other solid minerals for 2024. From […]

Read More
FL - Solid mineral tax rates for 2024 announced

IRS Provides Waiver for Taxpayers Failing to Meet Foreign Earned Income Requirements, Rev. Proc. 2024-17

The IRS has provided a waiver for any individual who failed to meet the foreign earned income or deduction eligibility requirements of Code Sec. 911(d)(1) because adverse conditions in a foreign country […]

Read More
IRS Provides Waiver for Taxpayers Failing to Meet Foreign Earned Income Requirements, Rev. Proc. 2024-17

ERC Compliance Efforts Top $1 Billion in Six Months, IR-2024-78

The IRS announced that compliance efforts around erroneous Employee Retention Credit (ERC) claims have topped more than $1 billion within six months. “We are encouraged by the results so far of […]

Read More
ERC Compliance Efforts Top $1 Billion in Six Months, IR-2024-78

IRS Provides Guidance on Replacement of Certain Lead Service Lines, Announcement 2024-10

The IRS has announced the federal income tax treatment of certain lead service line replacement programs for residential property owners. It is required by the federal and many […]

Read More
IRS Provides Guidance on Replacement of Certain Lead Service Lines, Announcement 2024-10

IRS Releases Guidance on Form 1099-K, FS-2024-7; IR-2024-5

The IRS has released guidance to help taxpayers understand what to do with Form 1099-K. Responding to feedback from taxpayers, tax professionals and payment processors, […]

Read More
IRS Releases Guidance on Form 1099-K, FS-2024-7; IR-2024-5

Treasury Department's AI-Powered Fraud Detection Yields $375 Million Recovery

The Treasury Department‘s Office of Payment Integrity (OPI) deployed Artificial Intelligence(AI)-based fraud detection at the onset of Fiscal Year 2023, resulting in the recovery of over $375 million. […]

Read More
Treasury Department's AI-Powered Fraud Detection Yields $375 Million Recovery

FL - Senate approves IRC conformity changes

The Florida Senate approved a tax bill that changes the corporate income tax IRC conformity tie-in date. H.B. 7073, as […]

Read More
FL - Senate approves IRC conformity changes

FL - House passes bill that modifies IRC conformity date

Florida House of Representatives passed a bill with a provision that modifies the IRC conformity tie-in date for determining corporate […]

Read More
FL - House passes bill that modifies IRC conformity date

FinCEN Issues Guidance on Inflation Adjustments to Civil Monetary Penalties

The Financial Crimes Enforcement Network (FinCEN) issued guidance on inflation adjustments to its civil monetary penalties as mandated by the Federal Civil Penalties Inflation Adjustment Act of 1990 (the Act), as amended. This rule […]

Read More
FinCEN Issues Guidance on Inflation Adjustments to Civil Monetary Penalties

FL - IRC conformity update, disability employment credit proposed

Legislation introduced in the Florida House of Representatives proposes to: update the IRC conformity tie-in date for determining corporate income […]

Read More
FL - IRC conformity update, disability employment credit proposed