Refund delayed? Our ability to help may be limited.
Despite all its challenges, the IRS processed 136 million individual income tax returns and issued 96 million refunds totaling $270 billion during the 2021 filing season. For those not familiar with IRS jargon, the term “filing season” is a term of art that includes income tax returns filed on or before the due date of the return, without considering returns filed after the due date or before the October 15 extension date. For example, the 2021 filing season consists of mostly tax year 2020 income tax returns filed between February 12, 2021, and the postponed due date of May 17, 2021.
In addition to its traditional work, the IRS was entrusted by Congress to issue three rounds of stimulus payments – over 475 million payments worth $807 billion – and delivered other financial relief programs to mitigate the impact of the pandemic on U.S. families and businesses. The IRS and its employees deserve tremendous credit for what they have accomplished under exceedingly difficult circumstances. The filing season challenges continue to date and, as the Commissioner has acknowledged, there is always room for improvement. This past year and the 2021 filing season conjure up many clichés for taxpayers, tax professionals, the IRS, and its employees – it was a perfect storm, it was the best of times and worst of times, patience is a virtue, with experience comes wisdom and with wisdom comes experience, out of the ashes, and throughout the past year we experienced historic highs and lows.
In a previous blog post (and in part II here), we discussed the reasons taxpayers suffered a bumpy ride early in the 2021 filing season. Now that the 2021 filing season has closed (May 17 – the postponed due date for individual tax returns), we have full filing season data available. As we are painfully aware, the pandemic created many challenges for taxpayer during the last two filing seasons. Paper return processing was and continues to be an obstacle for taxpayers, late enacted legislation required manual return reviews causing tens of millions of refund delays with millions of taxpayers still waiting. The majority of Taxpayer Assistance Centers (TAC) are now open to the public but are operating by appointment-only as a safety measure to protect taxpayers and employees. In addition, taxpayers have experienced difficulty contacting the IRS because of the unprecedented high call volumes to IRS Customer Service Representative phone lines, which were four times higher this filing season. The high volume of manually processed returns, the limited information available to taxpayers about the status of the return processing, the delays in refunds, and the difficulty reaching IRS employees have caused much frustration for taxpayers and practitioners.
To provide an apples-to-apples comparison, we utilized data from the IRS covering the two pre-COVID filing seasons and two COVID filing seasons. It goes without saying that the COVID years provided unique challenges and were an aberration due to the impact of the COVID-19 pandemic. The table presents key data points of return processing and web usage during the past four filing seasons to provide a broad overview of the filing seasons. The figures below utilize the IRS’s numbers as of the Friday after the close of each filing season (weeks ending April 20, 2018; April 19, 2019; July 17, 2020; and May 21, 2021).
|Filing Season||2018||2019||2020||2021||% Change 2018-2021|
|Individual Income Tax Returns||Total Receipts||136,919,000||137,233,000||151,782,000||148,012,000||8%|
|e-Filing Receipts||Total e-Filing||124,515,000||126,264,000||143,379,000||138,563,000||11%|
|Total 2 Refunds||Number||95,434,000||95,737,000||100,483,000||95,632,000||0%|
|Amount||$265.3 bil||$260.9 bil||$276.1 bil||$270.3 bil||2%|
|Web Usage||Visits to IRS.gov||386.9 mil||421.5 mil||1,380.7 mil||1,372.7 mil||255%|
The data also show a substantial increase in visits to IRS.gov since 2018. This seems at least partly attributable to the many questions taxpayers had about COVID-19 relief legislation and the IRS’s attempt to answer them by posting hundreds of “frequently asked questions” (FAQs).
Two of the most significant challenges taxpayers have faced this filing season include (1) a huge backlog in the manual processing of tax returns and (2) an extreme difficulty reaching an IRS telephone assistor to get answers to their questions.
As of the end the 2021 filing season, the IRS had a backlog of about 35 million tax returns that require manual processing, meaning employee involvement is generally required before a return can advance to the next stage in the processing pipeline. The backlog includes about 16.8 million paper tax returns waiting to be processed; about 15.8 million returns suspended during processing that require further review; and about 2.7 million amended returns awaiting processing. In contrast to this filing season, in 2018 and 2019, pre-pandemic years, the IRS had a backlog of 7.4 million and 10.7 million returns, respectively, awaiting manual review at the close of the filing season.
Of the 15.8 million returns suspended during processing, most were sent to the “Error Resolution System” for further review of specific items. Two of the most common items were “recovery rebate credit” (RRC) claims and Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) “lookback” claims. Although the majority of eligible taxpayers received their EIPs quickly and seamlessly, millions of eligible taxpayers had not received payment as of the beginning of the 2021 filing season. Taxpayers who had not received the full amount of EIP to which they were entitled were instructed to claim the missing funds as an RRC on their 2020 returns. The IRS had to manually verify many of these claims to ensure the amounts were correct.
In addition, the IRS had to manually verify returns where the taxpayer elected to use 2019 earnings to claim the EITC or the ACTC. Because of changes to the tax law that took place late in 2020, the IRS did not have time to adjust its systems for the 2021 filing season to allow 2019 earnings to be systemically verified. The IRS Error Resolution System holds these returns in suspense until an employee can manually review the return and verify the RRC claimed on the return or the 2019 earnings for EITC and ACTC lookback claims.
Total Volumes to
|2019||Paper Returns Awaiting Processing||1,600,000||1,500,000||–||3,200,000|
|Processing Suspended Returns||3,000,000||500,000||–||3,500,000|
|Unprocessed Amended Returns (Form 1040X)||700,000||700,000|
|Total Unprocessed Returns – 2019 Filing Season||5,300,000||2,000,000||–||7,400,000|
|2020||Paper Returns Awaiting Processing||3,400,000||1,000,000||–||4,300,000||34%|
|Processing Suspended Returns||4,900,000||900,000||–||5,800,000||66%|
|Unprocessed Amended Returns (Form 1040X)||600,000||600,000||-14%|
|Total Unprocessed Returns – 2019 Filing Season||8,900,000||1,900,000||10,700,000||45%|
|2021||Paper Returns Awaiting Processing||6,100,000||5,600,000||5,100,000||16,800,000||291%|
|Processing Suspended Returns||14,200,000||1,600,000||–||15,800,000||172%|
|Unprocessed Amended Returns (Form 1040X)||2,700,000||2,700,000||350%|
|Total Unprocessed Returns – 2019 Filing Season||23,000,000||7,200,000||5,100,000||35,300,000||230%|
The 35.3 million unprocessed returns at the end of the 2021 filing season represented a four-fold increase from the 7.4 million unprocessed returns at the end of the 2019 filing season. Processing delays matter greatly because most individual taxpayers overpay their tax and are entitled to receive refunds (this filing season, 70 percent of income tax returns had associated refunds, with an average refund of $2,827). Now that the filing season has ended, the good news is that the stream of new returns entering the processing pipeline will slow dramatically, at least until we approach the extended filing deadline of October 15. But millions of taxpayers are still waiting for their returns to be processed or for processing of their correspondence replying to an IRS inquiry. And the IRS is waiting to hear back from millions of taxpayers to process the returns. It is important to note that if a taxpayer received correspondence requesting additional documentation or information, it is imperative that he or she respond promptly so as not to contribute to the delay.
The IRS received more telephone calls this filing season than in any previous fiscal year – causing frustration and stress for taxpayers and practitioners. Taxpayers whose returns are caught in processing backlogs called the IRS toll-free telephone lines seeking help or asking for an explanation for the delays and what they need to do. Taxpayers who did not receive their stimulus payments when they expected also called the toll-free lines and most likely called often.
The table below shows the surge of calls the IRS has received and the related challenges taxpayers have experienced while navigating this difficult filing season.
|Calls Answered by Customer
Service Representatives (CSRs)
|% of Calls
Answered by CSRs
|“CSR Level of Service”||73%||59%||52%||19%||-75%|
|Time on Hold (in minutes)||9||13||17||20||127%|
|Calls Answered by Customer
Service Representatives (CSRs)
|% of Calls
Answered by CSRs
|“CSR Level of Service”||79%||67%||54%||6%||-92%|
|Time on Hold (in minutes)||4||9||14||20||469%|
This filing season was anything but normal, as evidenced by the historically high volume of calls. During the 2021 filing season through May 22, 2021, the IRS had received 167 million calls on its enterprise-wide toll-free telephone lines, nearly four times the number of calls it received during the 2018 filing season. Enterprise-wide Customer Service Representative (CSR) level of service (LOS) dipped sharply from 73 percent in 2018 to 19 percent in 2021. Only nine percent of callers reached a live assistor, and those that got through had to wait on hold an average of 20 minutes.
The most frequently called toll-free number is the “1040” line for individual income tax services. This filing season, about 85 million calls were directed to this 1040 line, compared to just eight million calls in the 2018 filing season – over ten times the call volume. Only three percent of callers (one out of 33 callers) to this phone line reached a CSR, and those who did waited on hold an average of 20 minutes in 2021.
Taxpayer service at the IRS has been historically poor over the past year – we can rationalize it and understand it, but there is no way to sugarcoat it. This filing season was the quintessential definition of a perfect storm – a particularly bad or critical state of affairs, arising from several negative and unpredictable factors. The pandemic created some of these challenges, but it also shined a light on existing problems.
For a more in-depth discussion of the IRS’s 2021 filing season performance, please keep an eye out for the National Taxpayer Advocate’s Fiscal Year 2022 Objectives Report to Congress, which is being published on June 30 and will be available on our website.
Adversity creates opportunities, and the pandemic helped focus attention on areas where improvements are necessary and achievable. We remain optimistic that the IRS can capitalize on its “lessons learned” and improve the taxpayer experience – U.S. taxpayers deserve a responsive and respectful tax administration that serves all taxpayers fairly. TAS is committed to working with taxpayers, the IRS, and Congress to improve taxpayer service.
The views expressed in this blog are solely those of the National Taxpayer Advocate. The National Taxpayer Advocate presents an independent taxpayer perspective that does not necessarily reflect the position of the IRS, the Treasury Department, or the Office of Management and Budget.