The IRS is facing a paper return pile-up.
Taxpayers may be in for a long wait for refunds, as an estimated 4.7 million returns were backlogged at the IRS by mid-May because of the agency’s employee evacuation for the coronavirus pandemic, according to a National Taxpayer Advocate report released Monday.
“Although the IRS is reopening some of its core operations, it is not clear when it can open and log all the returns sitting in mail facilities,” the report said.
While more than 90 percent of individual tax returns filed annually to the IRS are sent in electronically, another approximately 10 million paper returns still arrive by mail.
The paper return pile-up — which the taxpayer advocate's office computed through May 16 — started happening after the IRS in late March sent tens of thousands of employees home to limit the pandemic’s spread. Processing such documents can’t be done remotely, so IRS workers who’ve been recalled throughout June to resume more normal duties have just begun to address the paper return inventory.
The holdup in processing paper returns comes amidst an unusual filing season in which the IRS delayed the tax return deadline by three months to July 15 due to the pandemic. The agency also delayed numerous other taxpayer deadlines in the process, numbering more than 300 in total, according to the report.
Among other disruptions, it also said the IRS has had trouble processing applications for business taxpayers that have filed claims for the pandemic-related tax credit they can get for keeping employees on payroll. IRS phone lines and other taxpayer assistance processes like refund corrections have also been unusually hampered this year, in which much of the agency's focus has shifted to distributing some 160 million economic stimulus payments.
The report was the first filed to Congress by Erin Collins, who took over as National Taxpayer Advocate earlier this year.
IRS Commissioner Chuck Rettig is scheduled to testify on this year’s tax filing season Tuesday in front of the Senate Finance Committee. Collins’s report said she’d submit a more comprehensive follow-up when the filing season is more complete.