IRS ended filing season with 35M unprocessed tax returns

The IRS ended this year’s filing season with more than 35 million individual and business tax returns that have not yet been processed, according to an independent watchdog report released Wednesday. 

The report, conducted by the National Taxpayer Advocate’s office at the IRS, found that while most taxpayers were able to successfully file their returns and receive refunds, a record high number of Americans did not, with unprocessed tax returns more than four times greater than the number recorded at the end of the 2019 pre-pandemic filing season. 

Included in the more than 35 million unprocessed returns were 16.8 million paper tax returns waiting to be processed, 15.8 million that were suspended during processing and require further review, and roughly 2.7 million amended returns that still need to be processed, according to the report. 

The returns will require manual processing, meaning that employee involvement is likely needed before a return is able to move to the next step in processing, according to the document. 

The report, conducted by office head Erin Collins, noted that the COVID-19 pandemic has brought challenges to not only taxpayers but also the IRS, whose “employees endured personal and professional challenges, which resulted in a historically high volume of unanswered telephone calls to its phone assistors and a historically low level of service.” 

“Millions of 2019 and 2020 paper returns were delayed and awaited processing, and tens of millions of returns awaited the atypical necessity of manual reviews — most still waiting for processing,” the report added. 

“The COVID-19 pandemic has strained the IRS’s customer service performance, and its ability to adequately assist taxpayers continues to be negatively affected,” it continued, also citing three rounds of stimulus payments that it said placed additional responsibilities on the IRS to provide financial relief to millions of Americans. 

In a press release announcing the report, Collins said that “this past year and the 2021 filing season conjure up every possible cliché for taxpayers, tax professionals, the IRS, and its employees.”

“It was a perfect storm; it was the best of times and the worst of times; patience is a virtue; with experience comes wisdom and with wisdom comes experience; out of the ashes we rise; and we experienced historical highs and lows,” she added. 

However, the IRS said in its press release that it was able to process 136 million individual income tax returns, issuing 96 million refunds totaling about $270 billion. 

Upon direction by Congress, the IRS also issued about 475 million stimulus payments totaling $807 billion during the pandemic for families and businesses. 

“The IRS and its employees deserve tremendous credit for what they have accomplished under very difficult circumstances,” Collins said Wednesday. “But there is always room for improvement.”

IRS Commissioner Charles Rettig has said that workers are using mandatory overtime in order to quickly process the remaining returns, telling the Senate Finance Committee earlier this month that it had processed the returns it received in 2020 that were previously backlogged.