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Get ready for 'frustrating' tax season as IRS battles historic backlogs and staff shortages

Treasury Department officials said that after a decade of cost-cutting measures, the IRS workforce is the same size it was in the 1970s.

Get ready for tax refund and filing delays this year, the Treasury Department warned, as the IRS starts tax season with a significant pandemic-born backlog and ongoing staffing and funding shortages.

The IRS has “enormous challenges,” and taxpayers should gird themselves for a “frustrating season,” Treasury Department officials said Monday.

The IRS is starting filing season with 6 million unprocessed returns from the previous year, about 5 million more than usual.

“Covid has caused additional problems,” said Erin Collins, the national taxpayer advocate. “If you have an issue with your return, you will experience delays.”

Covid has caused additional problems. If you have an issue with your return, you will experience delays.

The agency faces staff shortages, with fewer than 15,000 workers handling 240 million calls last year. Its workforce is the same size it was in 1970, with a budget 20 percent lower than it was 10 years ago.

Tax preparers say they’ve been unusually stymied in the past year as they try to get returns processed.

“Between complete shutdowns of offices and processing centers since Covid began to automatic voicemails when calling special practitioner-only help line numbers to most IRS audit and collection cases’ being in backlog mode, we are patiently waiting for IRS budget shortfalls to be funded by Congress so taxpayers can get their refunds quickly and be able to communicate with the IRS in a relatively stress-free fashion when they receive an IRS notice or letter,” said Harvey Bezozi, a certified public accountant and financial strategist.

Paper returns pose a special challenge, as IRS agents are required to be in the building to process them. Covid and social-distancing measures limit the number of employees who can be on-site, further slowing the process.

“Paper is the IRS’s Kryptonite, and the agency is still buried in it,” the national taxpayer advocate said in its annual release.

Paper is the IRS’s Kryptonite, and the agency is still buried in it.

The report said that last year the IRS’s “Where’s my refund?” tool often lacked information about unprocessed returns and gave no reasons for delays or suggested courses of action for taxpayers. Telephone service was at its “worst,” with only 11 percent of callers getting their questions answered, the report said.

The advocate recommended that the IRS use scanning technology for paper returns and a “customer callback” system for phone lines and allow customers to communicate securely by email to improve customer service.

The agency received $2 billion in funding as part of President Joe Biden's American Rescue Plan, and the proposed 2022 budget calls for a 15 percent increase in IRS funding. The administration has also earmarked $80 billion for the IRS over 10 years as part of the Build Back Better Act. The measure has passed in the House but stalled in the Senate.

Experts say that to get refunds and returns processed as swiftly as possible, taxpayers should file early, file online, triple-check for errors and choose direct deposit.

If you must file a paper return, file it swiftly, as paper returns are processed in the order they are received.

But if your refund is delayed, there is a silver lining: It will earn interest.