Expect IRS Delays This Season

U.S. Treasury officials are warning of longer processing times of tax returns and responses to taxpayer inquiries for the upcoming tax season (January 24 – April 18). The Treasury Department’s concern is based on the enormous backlog of 2020 returns that need special processing due to errors stemming from the various COVID relief legislations, as well as IRS staff shortages (due to pandemic-forced closures of processing centers and pre-pandemic budget cuts). With the IRS still dealing with 2020 returns, taxpayers can expect more processing headaches for the 2021 tax season.

The U.S. Treasury has not publicly provided solutions to remedy the processing delays. It has been reported that last year there was one IRS staffer to handle every 16,000 calls to the agency. Accordingly, taxpayers are experiencing lengthy delays to answers to questions and for requests for penalty abatement.

Information on Specific Forms

Form 1040, Individual Tax Return   As of December 23, 2021, the IRS had six million unprocessed individual returns. Most of these returns need special handling such as those that require correction to the Recovery Rebate Credit amount. According to the IRS, the resolution of these issues could take 90 to 120 days based on the ability of IRS staff to complete processing of responses to IRS notices.

Form 1040-X, Amended Individual Tax Return   As of January 1, 2022, the IRS held 2.3 million unprocessed Forms 1040-X. The current timeframe may be more than 20 weeks.

Form 941, Employer’s Quarterly Federal Tax Return   As of January 5, 2022, the IRS held 2 million unprocessed Forms 941. Employers who filed electronically and received an acknowledgement do not need to take further action. Regarding Forms 941-X (amended returns), as of January 5, 2022, total inventory of unprocessed Forms 941-X, including those involving COVID credits, was approximately 446,000, which are being held pending the processing of related Forms 941.  

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