As of October 28, the Internal Revenue Service had about 4.4 million unprocessed individual returns, including tax returns and late-filed returns from 2021.In an update in early November, the IRS reported that of the 4.4 million unprocessed returns, about 1.9 million require error correction or other special handling, and 2.5 million are paper returns that still need to be reviewed and processed. Although the IRS does not need to correspond with taxpayers, the work requires special handling by an IRS employee. It takes the IRS more than 21 days to issue any related tax refund.

Some problems that hold up tax returns come from amended returns and other tax returns indicating pandemic-related benefits. The IRS is also still trying to hire thousands more employees to fill the ranks as workers retire. Luckily, the IRS is set to receive an extra $80 billion in funding over the next ten years as part of the Inflation Reduction Act, and the funds are going toward hiring more taxpayer service employees, improving the IRS’s aging technology, and increasing taxpayer audits and enforcement, particularly for wealthy and corporate taxpayers.

The IRS has more than 250,000 unprocessed Form 941-X adjusted quarterly tax returns and claims for a refund from employers in its inventory, but some cannot be processed until the related Form 941, Employer’s Quarterly Federal Tax Return, is processed first. As of November 2, the IRS still has about 2.5 million 941 Forms in its inventory waiting to be processed. There are also delays in processing taxpayer correspondence, with about 4.5 million pieces of correspondence awaiting processing. Many of the documents are scheduled to be worked on by IRS customer service representatives who have to split their time during filing season between answering phones and processing amended returns and correspondence.

Talley’s team of tax professionals provides comprehensive tax compliance and consulting services so you can preserve, enhance, and pass on your assets and wealth to the next generation. We welcome the opportunity to discuss the current options available for you. For more information, contact us today.