WASHINGTON — The IRS is expected to push back the country’s tax-filing deadline to May 15, according to two people familiar with the decision, as the agency grapples with a massive backlog of 24 million returns it has yet to process since the 2019 tax year.
The mounting work has left the agency underwater in recent months, and under political siege, as lawmakers come to fear that long-unresolved troubles at the IRS could undercut the Biden administration’s new economic recovery efforts. Millions of Americans still have not received stimulus checks under prior coronavirus aid packages, even as the tax agency began doling out payments Wednesday under the $1.9 trillion stimulus signed into law this month.
The IRS shared the full scope of its backlog in recent days with the House Ways and Means Committee and the agency’s internal watchdogs, documents later reviewed by the Washington Post. The agency also communicated its plans to push back the filing deadline to congressional offices, according to one of the people familiar with the decision but not authorized to speak about it, saying it could change.
The effects of the IRS backlog have been vast: The delays have kept some Americans from receiving their tax refunds for months while preventing some cash-strapped workers and companies from taking advantage of additional programs that Congress authorized to blunt the economic harm of the pandemic.
Ken Corbin, the commissioner of the wage and investment division at the IRS, declined to discuss the potential changes to the tax filing deadline during an interview Wednesday. He said the situation reflects the “many challenges” the country and agency have faced as a result of the coronavirus and other more recent obstacles, including weather that slowed its operations.
“The IRS will always have returns in processing,” he said.
For Patrick O’Conor, though, the IRS backlog has been costly: He estimates that the government owes him about $16,000 in missing tax refunds and stimulus payments as a result of significant lags in processing his 2019 and 2020 taxes. The Frederick, Md.-area resident says it’s been particularly rough since he and his wife recently had a baby and bought a home over the past year.
“We haven’t missed any payments yet on anything,” he said, “but it’s come really really close.”
The Biden administration is counting on the IRS to administer broad swaths of the $1.9 trillion American Rescue Plan signed into law last week. That includes stimulus payments, a major Democratic campaign promise, which started reaching Americans’ bank accounts this week.
IRS Commissioner Charles Rettig is expects to face tough questions about the backlog on Thursday, when he testifies in front of the House Ways and Means Committee. In recent weeks, the panel’s Democratic and Republican lawmakers have urged the IRS to extend the tax-filing deadline from April to later this year, much as it did in 2020.
“The IRS is in a hole and needs to stop digging,” said Rep. Richard Neal, D-Mass., the chairman of the panel, in a statement pointing out the IRS backlog, its delays in processing some stimulus payments and its logistical challenges in answering taxpayers’ questions promptly.
“It is time to assess what must be done now to deliver the service Americans deserve,” he continued in a statement. “It is in the best of all to extend the filing season.”
For some lawmakers, the IRS delays come as no surprise. Under GOP leadership, Congress slashed the tax agency’s budget by billions of dollars, contributing to the loss of tens of thousands of critical IRS jobs while leaving long-known deficiencies in its computer systems unaddressed for decades.
The coronavirus pandemic has also presented new challenges, forcing much of the IRS workforce to complete its tasks from home while saddling the agency with considerable new responsibilities, including three rounds of one-time stimulus payments. Most of these payments have reached hundreds of millions of Americans, making them one of the government’s most popular relief programs.
The agency has struggled in other respects, including tax returns for workers and businesses. The details are listed in information the IRS provided to the House Ways and Means Committee and the Treasury Inspector General for Tax Administration, which Democratic aides later shared with The Post. A spokesman for the TIGTA this week confirmed the figures but said they had not independently audited information it obtained from the IRS.
The IRS has not started processing more than 12.3 million paper-based tax returns it has received over the past two years, the majority of which have been filed by businesses. The lag time has created major headaches for some companies, potentially precluding them from taking full advantage of new tax breaks implemented in past stimulus laws, Democratic aides said.
That backlog has harmed average American families as well: The IRS has not started to process at least 2.4 million individual paper-based tax returns from the 2019 tax year, according to the federal data, which reflects the agency’s work up to March 15. As a result, these Americans may not have received stimulus payments under the relief bill Congress adopted in December, since the stimulus law tied their eligibility for checks to 2019 tax filings.
The IRS said that not every individual in this group may have been eligible to receive the aid, and that it did not have statistics on the number of Americans waiting for previous stimulus payments. Cole, a top agency official, defended the agency’s work getting stimulus payments out, and said the total number of checks that were sent matches “what was projected to be the eligible population.”
Some of those 2.4 million Americans will collect previous stimulus payments after filing their 2020 tax returns if they are eligible. But they may face another long wait. The IRS has racked up an additional backlog of another 12.4 million returns filed mostly by individuals online and on paper, from the 2020 tax year that it has started processing but suspended pending further, deeper review, according to the government figures.
The tally includes roughly 7 million returns that the IRS has designated for “error resolution,” meaning they will require manual review that takes months to wrap up. The Post first reported on these figures last week. The IRS also has millions of additional tax returns to review, including those involved in investigations around suspected issues including identity theft, contributing to its immense workload.
Acknowledging the issues, the Treasury Department said in a statement Wednesday that the backlog reflects “serious challenges stemming from inherited problems and diminished capacity.” An agency spokeswoman said the IRS has sent 90 million stimulus payments under the American Rescue Plan. “It will take time to work through these challenges we inherited, but this investment will help us in tackling them head on,” the department added.
The agency’s struggles have triggered bipartisan concern on Capitol Hill over the past few months. In February, Republicans on the House Ways and Means Committee – including Rep. Mike Kelly, the top GOP member of its oversight panel – wrote the IRS on behalf of constituents who have peppered lawmakers’ offices, trying to track down missing refunds.
“We cannot have millions of hard-working Americans and small business owners waiting up to a year to receive money that they are owed, and the federal government paying billions of dollars in interest on top of that,” said Kelly, adding his office never received a response to the earlier letter. “This needs to be fixed.”
Democrats, meanwhile, have said the situation points to the need for broader change at the IRS. The recently adopted $1.9 trillion stimulus includes billions of dollars to help modernize the agency, but party lawmakers say a more permanent fix is necessary to prevent similar backlogs from building up in the future.
“It’s much harder for the IRS to build the plane while flying it,” Senate Finance Committee Chair Ron Wyden, D-Ore., said in a statement. “We need sustained funding so the IRS can build and maintain these systems over the long-term.”
The backlog has only compounded other troubles at the IRS, including technical glitches that took down its Web portal for tracking refunds this year – and lingering staffing shortages that appear to affect its ability to answer taxpayers’ questions in a difficult year. About a quarter of those who call the IRS actually end up speaking to someone, according to agency data shared with lawmakers, who expressed concern with the response rate.
The ranks of the frustrated include Neava Ford, a Kansas City-area resident who filed her 2019 tax returns late and has not heard much from the agency five months later. She has not received a stimulus check, but Ford says she has not bothered to call the IRS because she knows she probably will not speak to anyone.
“I knew it would be pointless with everything that would be going on,” she said.
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