With a week to go for taxpayers to file their 2021 returns before facing fines and penalties, it appears that it will be the IRS that will have to cough up billions for delays.
The tax agency last year forked over more than $3 billion in interest on late refunds and paid $177 million in overtime because it was short-staffed, a 103% increase over the 2020 tax season, according to a damning new audit.
The Government Accountability Office said in an audit that “2021 was a trying year for IRS. Ongoing challenges precipitated by the COVID-19 pandemic, coupled with new responsibilities to provide relief to Americans, adversely affected IRS’s return processing and customer service during the 2021 filing season.”
It appears that this year won’t be much better. Not only did GAO find continued problems with the way the tax agency is run, but staff shortages continue to plague the IRS, which has been trying to hire thousands more workers.
Over 74 pages, the GAO listed several major problems that directly affect taxpayers, from unanswered phones to late tax refunds.
A big problem is a delay in clearing away old tax filings before the new season begins, GAO said. Last year, it began with a backlog of 8 million returns, and by December, that had grown to 10 million.
What’s more, it had problems with the “Where’s My Refund” online tool and lacked enough staff to keep up with phone calls and in-person meetings.
As a result, the government, and by extension taxpayers, will again have to pay the price both in delays this year and in interest payments for those delays.
Over the past seven years, the GAO said the Treasury Department has paid out $14 billion in interest on late refunds. The average was some $2 billion a year, but that jumped to $3.3 billion last year.
Overtime, mandatory and voluntary, has also surged because there is more work than staff to handle it. Turnover is high at the agency, and many jobs go unfilled. The audit said that for every 10 new hires, four fill jobs of those leaving the agency.
“As a result, from February to August 2021, IRS required returns processing staff to work 10 hours of overtime per week,” GAO said.
It’s expensive. GAO added, “IRS has consistently used overtime to meet returns processing milestones, respond to taxpayer calls and correspondence, and address increases in workload. During fiscal year 2021, IRS again relied heavily on overtime to address both customer service demand and returns processing work. … IRS doubled the amount of overall overtime used in fiscal year 2021 (in terms of full-time equivalent employees), compared to fiscal year 2020. Further, overtime costs for returns processing and customer service staff totaled $177.1 million in fiscal year 2021. This is about a 103% increase compared to overtime costs for fiscal year 2020 ($87.1 million).”
