4 tips and tricks for this chaotic tax season
The Internal Revenue Service has long drawn the ire of taxpayers, but this tax filing season could be one of the record highs.
With some 11.8 million paper tax returns from previous years yet to be processed by the IRS — many of which have sat piled up in trailers outside processing facilities for months — any 2021 statement that requires a human touch or contains a simple math error could be saved for months, delaying any refunds.
Meanwhile, millions of individual taxpayers are facing unique challenges preparing their returns this tax season, but severe staffing shortages have crippled the IRS’ ability to field calls to answer questions.
A major challenge for taxpayers is how to report pandemic-related stimulus and advanced child tax credit payments on their 2021 returns. Normally, child tax credit is claimed in full on a tax return, but the 2021 credit was partially paid out to many families last year.
“Many payments were deposited directly, and people don’t even know they received them, let alone how many,” says Jennifer Mosley, senior tax associate at Seattle accounting firm Moss Adams, noting that many people be surprised by a lower refund, or may even owe taxes because the credit has already been issued.
Many other taxpayers are wondering how to submit their 2021 returns when their 2020 returns, or even previous ones, have not yet been processed.
“It’s an absolute disaster,” says Ryan Losi, executive vice president of Piascik, an accounting firm in Glen Allen, Virginia. getting the wrong information on forms to fill out and not having timely mailed tax payments applied to their accounts. »
It’s not just taxpayers who file paper returns who have difficulty. People who file returns with errors can also be held back — and that’s potentially a large group: Math errors reported by the IRS rose to 11 million last year on 2020 returns from 1.9 million the previous year, mainly due to confusion over how to report the first pandemic stimulus payments.
The pandemic is responsible for many of the IRS’ problems. Administering temporary legislation strained resources, and agency offices closed for several months at the start of the pandemic.
But the problems predate Covid-19. Congress has eaten away at the IRS budget for more than a decade, which has hurt the agency’s effectiveness. In its 2020 fiscal year, the IRS had 20% fewer full-time workers than a decade ago, and yet the volume of returns has steadily increased.
The phone response rate was dismal. Last year, the IRS had 16,000 workers answering 240 million calls, or about 15,000 each. Even before the pandemic, the response rate was low, around 35%. This year, the IRS reassigned 1,200 of its employees to the phones to help.
The lack of resources is alarming for an agency charged with so much, says Janet Holtzblatt, senior fellow at the Urban-Brookings Tax Policy Center. “I never say never about the ability of the IRS to survive challenges, but we are in a situation of biblical proportions,” she says.
Besides collecting taxes and enforcing tax laws, the agency’s job is to translate new legislation into specific regulations and procedures that taxpayers can follow.
This is no small task, especially when laws are rushed through Congress.
For example, lawmakers rushed to cobble together the Tax Cuts and Jobs Act to pass it before the end of 2017. Guidance on key provisions took until 2021 to release final regulations on the 86 provisions, says Garrett Watson, senior tax policy analyst at the Tax Foundation.
The burden falls on individual taxpayers. Advisors and the IRS recommend the following steps to make the tax filing process easier.
Submit early, electronically and opt for direct deposit
Individual taxpayers have a good chance of avoiding traffic jams and headaches if they file their return electronically and as soon as possible. Last year, 81% of tax returns were filed electronically.
When taxpayers file their return electronically, they should avoid making mistakes and opt for direct deposit. Any refund can be issued within 21 days.
Time your calls to the IRS
The agency’s call center is open weekdays from 7 a.m. to 7 p.m. in all time zones.
As the IRS asks taxpayers to avoid calling and instead use irs.gov For answers, if you have to call, your best chance of reaching an IRS agent is before 9 a.m. Tuesday through Thursday, says Angela Anderson, an Atlanta-based accountant and consultant.
Monitor your records online
Taxpayers can view their records by creating an account on the IRS website at irs.gov/account. The accounts should reflect any advance child tax credits or stimulus payments.
Request a suspension of your account
If you have an unprocessed return from previous years that you intended to apply the refund to in a later year, you may receive erroneous IRS collection notices, says Moss Adams’ Mosley.
The situation can escalate to the point where the IRS withdraws funds from your bank account, she says.
“Avoid this by asking the IRS to suspend your account until your returns are processed,” says Mosley.
Of course, to do this, you must get in touch with the IRS. Keep some aspirins handy.
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