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MSP #1: PROCESSING AND REFUND DELAYS

Excessive Processing and Refund Delays Harm Taxpayers

TAS Recommendations and IRS Responses

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1.

TAS RECOMMENDATION #1-1

Provide weekly filing season reports on IRS.gov about the status of return processing timeframes so taxpayers know what to expect when they file their returns.

IRS RESPONSE TO RECOMMENDATION: ​The IRS is in the process of launching a “Filing Season Processing Times” page on IRS.gov to regularly provide updated information for the most commonly filed individual and business tax return types, letters, notices, and other forms. Viewers will be able to check average processing times for individual and business returns as well as amended return submissions. It will also provide links to tools, such as Online Account, Where’s My Refund? and Where’s My Amended Return? that allow taxpayers to check their specific refund status, determine the status of their amended return, and contact information for reaching the IRS directly. Taxpayers will also find links to filing season alerts and COVID-19 processing-related information.

CORRECTIVE ACTION: The IRS is in the process of launching a “Filing Season Processing Times” page on IRS.gov to regularly provide updated information for the most commonly filed individual and business tax return types, letters, notices, and other forms. Viewers will be able to check average processing times for individual and business returns as well as amended return submissions. It will also provide links to tools, such as Online Account, Where’s My Refund? and Where’s My Amended Return? that allow taxpayers to check their specific refund status, determine the status of their amended return, and contact information for reaching the IRS directly. Taxpayers will also find links to filing season alerts and COVID-19 processing-related information.

Update: Launch of “Filing Season Processing Times” page has been developed and is awaiting approval.

Update: Processing Dashboard went live on December 18, 2023.

TAS RESPONSE: The National Taxpayer Advocate is pleased that the IRS agrees with this recommendation and is in the process of launching a “Filing Season Processing Times” page on IRS.gov. It is disappointing that this page was not operational in time for the 2022 filing season, however. We will keep this recommendation open until this page gets launched.

Update: TAS is monitoring this recommendation until after the 2024 filing season so we can analyze the dashboard in action when it matters the most to taxpayers.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Open

DUE DATE FOR ACTION (if left open): TBD

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2.

TAS RECOMMENDATION #1-2

Improve online resources to provide taxpayers with specific information about the cause of the taxpayer’s refund delay, what information the taxpayer needs to provide, and a reasonable estimate regarding when the IRS expects to issue the refund.

IRS RESPONSE TO RECOMMENDATION: ​​The IRS agrees with the TAS recommendation to improve online resources and provide taxpayers with specific information about the cause of the refund delay, what information the taxpayer needs to provide, and a reasonable estimate regarding when the refund is expected to be issued. The IRS plans to implement the recommendation (in full or part) if additional resources/funding are made available.

Where’s My Refund? (WMR) is an online resource that provides taxpayers with a refund status as early as within 24 hours of receipt of an e-filed return, or generally within four weeks after a paper return has been mailed. It has the most up-to-date information about taxpayer refunds providing an intuitive tracker for most refund statuses at the topof the screen – “return received,” “refund approved,” or “refund sent.” WMR also provides explanations about math errors and adjustments.

On January 3, 2022, the IRS implemented changes to WMR to improve messaging for taxpayers whose refunds are held or delayed by additional processing activities and provide improved messaging on returns in processing for extended periods. The IRS is currently assessing multiple tax year functionality for WMR, allowing most taxpayers to access refund information for the last two tax years. The IRS plans to integrate refund status information into Online Account in the future. When this occurs, we expect the WMR tool will remain available outside of Online Account to serve taxpayers who may not have created an Online Account. The IRS will conduct a research effort during 2022 to further review specific taxpayer needs and expectations regarding online information of refund status. We will use the research findings to help implement informed updates to WMR.

CORRECTIVE ACTION: N/A

TAS RESPONSE: The National Taxpayer Advocate is encouraged that the IRS has made incremental improvements to the WMR tool to expand the messaging, including the June 2022 change to Where’s My Refund? that expanded refund information to cover the 2021, 2020, and 2019 tax years. Recognizing that the more taxpayers can use self-service options online to inquire about the status and timing of their refunds, the fewer calls the IRS will need to answer, it is imperative that the IRS prioritize funding of the additional improvements mentioned in the IRS response.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

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3.

TAS RECOMMENDATION #1-3

Implement electronic amended return processing to eliminate the delays caused by traditional paper processing.

IRS RESPONSE TO RECOMMENDATION: ​​​​The IRS agrees with the TAS recommendation to implement electronic amended return processing to eliminate the delays caused by traditional paper processing. The IRS has implemented the recommendation by eliminating paper processing receipt in electronic format, eliminating the paper processes of extraction, batching, transcription, and routing of certain cases to other areas.

In August 2020, the IRS implemented the acceptance of electronically filed amended returns for Form 1040, U.S. Individual Income Tax Return. The initial implementation only allowed submission of electronic Tax Year (TY) 2019 amended returns for taxpayers who filed their TY 2019 original returns electronically. Beginning in January 2022, amended returns for TY 2019, TY 2020, and TY 2021 can be filed electronically.

In June 2022, Forms 1040-NR, U.S. Nonresident Alien Income Tax Return; 1040-SS U.S. Self-Employment Tax Return (Including the Refundable Child Tax Credit for Bona Fide Residents of Puerto Rico); and 1040-PR, Self-Employment Tax Return – Puerto Rico, will also be available for electronic filing. The Form 1040-X process to automate simple adjustment back-end processing is in the research phase for potential future implementation.

Implementation date: August 2020 (implemented in part), June 2022

CORRECTIVE ACTION: In June 2022, Forms 1040-NR, U.S. Nonresident Alien Income Tax Return; 1040-SS U.S. Self-Employment Tax Return (Including the Refundable Child Tax Credit for Bona Fide Residents of Puerto Rico); and 1040-PR, Self-Employment Tax Return – Puerto Rico, will also be available for electronic filing. The Form 1040-X process to automate simple adjustment back-end processing is in the research phase for potential future implementation.

Update: Requested funding to study and implement designs meant to automate the back-end processing of simple amended 1040-X returns. This request is still in process and waiting for approval. This study must be completed, and a new design developed before updates to the backend processing can be completed,

TAS RESPONSE: The National Taxpayer Advocate is pleased that the IRS has taken steps to allow the electronic filing of amended tax returns by individuals. We believe that this will result in significant reduction in processing time as well as elimination of transcription errors.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Adopted

OPEN or CLOSED: Open

DUE DATE FOR ACTION (if left open): 7/1/2024

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4.

TAS RECOMMENDATION #1-4

Immediately develop and issue guidance for the processing of Forms 941-X claiming COVID-19 employment tax relief.

IRS RESPONSE TO RECOMMENDATION: ​​​​The IRS agrees with the TAS recommendation to develop and issue guidance for the processing of Forms 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund, claiming COVID-19 employment tax relief. The IRS has implemented the recommendation.

The temporary guidance to hold cases related to processing Forms 941-X was lifted as updated guidance has been published. From November 16, 2021 through February 9, 2022, four Internal Revenue Manual (IRM) Procedural Updates (IPU) were issued to update IRM 21.7.2, Employment and Railroad Tax Returns, sub-sections to provide additional processing guidelines.

Implemented February 9, 2022 – Issued final IRM 21.7.2 IPU.

CORRECTIVE ACTION: N/A

TAS RESPONSE: The National Taxpayer Advocate appreciates the way the IRS was able to address this time-sensitive issue by developing and issuing this much-needed guidance for processing Forms 941-X claiming COVID-19 employment tax relief.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

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5.

TAS RECOMMENDATION #1-5

Create a dedicated team to process Forms 1139 and 1045 within 90 days of filing.

IRS RESPONSE TO RECOMMENDATION: ​​​The IRS increased the number of employees trained to process Form 1139, Corporation Application for Tentative Refund, and will ensure a sufficient number of employees are trained on both Forms 1139 and Form 1045, Application for Tentative Refund, but cannot commit to process all forms within 90 days of filing. There are several factors that impact workload delivery throughout each year. The receipts of these forms can be erratic because of legislative changes. The IRS is facing unprecedented inventory levels this year due to the pandemic and is applying its limited resources across all programs. The IRS will continue to make this program a priority, along with our other most critical programs.

CORRECTIVE ACTION: N/A

TAS RESPONSE: The National Taxpayer Advocate acknowledges that the IRS is in the unenviable position of having to make tough choices in allocating resources and appreciates that the IRS has made efforts to decrease the time needed to process Forms 1139 and 1045.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

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6.

TAS RECOMMENDATION #1-6

Authorize the use of secure email within the campuses for return processing issues, taxpayer questions, or follow up with taxpayers.

IRS RESPONSE TO RECOMMENDATION: ​​​The IRS plans to implement the recommendation (in full or part) if additional resources/funding are made available.

The IRS is actively exploring opportunities to establish secure email service channels such as a Taxpayer Digital Communications option related to math error notices. Continued development is dependent on securing funding, addressing authentication standards, and identifying appropriate workstreams for both the taxpayers and the business.

CORRECTIVE ACTION: N/A

Update (from 2020 4-3): Several secure messaging programs and pilots are in flight. These efforts include expanding the use of Taxpayer Digital Communications and providing secure two-way messaging that will give taxpayers the ability to communicate with IRS employees through their online accounts. While the IRS is committed to providing secure messaging, this digital communication will not be widely available by October 31, 2023. We are proposing to continue work on this recommendation and extend the due date to December 31, 2024.

TAS RESPONSE: The National Taxpayer Advocate is encouraged that the IRS agrees with our recommendation that secure email communication with taxpayers is worthy of pursuit. We understand that there are competing needs for IRS resources, but world-class customer service requires the IRS to expand the channels through which it communicates to taxpayers. Expanded use of secure email communications should be a priority for the IRS.

Update: This is a similar recommendation to 2020 #4-3 which is still open and being worked on. The due date on the 2020 recommendation is 10/31/2023 so we are keeping this open and will monitor it in conjunction with 2020 4-3.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Open

DUE DATE FOR ACTION (if left open): 12/31/2024

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7.

TAS RECOMMENDATION #1-7

Expand current online account offerings to allow taxpayers to upload documents necessary to resolve any issues associated with their tax returns.

IRS RESPONSE TO RECOMMENDATION: ​​​The Office of Online Services (OLS) has worked with IT on an Engineering Study with the goal of establishing solutions to make Taxpayer Digital Communications (TDC) eGain functionality – including secure messaging with document upload – available within our Web Apps such as Online Account (OLA). We completed the study in February 2022, and IT has confirmed readiness to move forward with related implementation work following approved funding and prioritization. An American Rescue Plan (ARP) funded task has been approved to make existing TDC functionality, such as use of secure-messaging and document upload to resolve a tax return issue such as a Corresponding Exam, made available in OLA. The specific use case to be delivered must still be finalized by IT and the business based on feasibility and priority. Target delivery is anticipated by December 2023.

CORRECTIVE ACTION: An American Rescue Plan (ARP) funded task has been approved to make existing TDC functionality, such as use of secure-messaging and document upload to resolve a tax return issue such as a Corresponding Exam, made available in OLA. The specific use case to be delivered must still be finalized by IT and the business based on feasibility and priority. Target delivery is anticipated by December 2023.

TAS RESPONSE: The National Taxpayer Advocate is pleased that the IRS is actively making progress in its efforts to allow taxpayers to upload documents. The results from the Engineering Study are encouraging. We will follow up in December 2023 to revisit the status of this recommendation and see if it has been fully implemented.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Open

DUE DATE FOR ACTION (if left open): 4/1/2024

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8.

TAS RECOMMENDATION #1-8

Suspend all automated collection notices until the IRS is current on processing original and amended returns and unprocessed correspondence.

IRS RESPONSE TO RECOMMENDATION: ​​​To provide better service to taxpayers in the current environment, IRS paused the progression of balance due amounts through the automated notice stream, effectively suspending automated collection notices, on February 5, 2022.1 We agree that pausing these notices temporarily is beneficial to taxpayers during this unprecedented time and recognize that many taxpayers rely on these notices to understand and meet their tax responsibilities. IRS will continue to monitor the situation to ensure the continued pause will not prevent taxpayers from receiving necessary communications to understand their balances, options available for resolution, the consequences of non-payment, or ways to seek clarification or contact the IRS for more information. We will make data driven decisions to determine when to resume the normal progression of the automated notice stream.

This recommendation has already been implemented.

CORRECTIVE ACTION: N/A

TAS RESPONSE: The National Taxpayer Advocate gives credit to the IRS for taking action to suspend automated collection notices in February 2022. The IRS’s willingness to implement temporary solutions to address potential taxpayer harm resulting from the unprecedented backlog of tax return processing is encouraging.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A