Despite warnings by Treasury Department officials in January that the tax season would be extraordinarily challenging, it has progressed more smoothly for taxpayers and preparers than expected, according to Accounting Today. The April 18 Tax Day was the first deadline to return to that month since 2019, before the COVID-19 pandemic. In 2020, the IRS extended the filing and payment deadlines to July 15, and last year, it extended those deadlines to May 17.
Accounting Today quoted Mark Jaeger, vice president of Tax Operations at TaxAct, a tax-prep software company, who said, “For most taxpayers who have fairly simple taxes, and they e-file and they choose direct deposit, that process—for the most part—has been very smooth.”
On the other hand, the New York Times reported that Treasury officials still found the tax season to be quite challenging because of staff shortages and the complexity associated with distributing pandemic relief money. Natasha Sarin, the Treasury Department’s counselor for tax policy wrote in a report, that “the IRS. knew walking into this filing season that it did not have the work force or technology in place to serve the American people the way they deserve to pick up the phones when taxpayers call, to help them access all the credits and benefits to which they are entitled, and to ensure that each and every taxpayer receives their refund quickly.”
Seeking to remedy these problems, the Biden administration, on Tax Day, made another pitch for Congress to give the IRS more funding. Its previous attempts to give the agency $80 billion over a decade have so far been rejected by Congress because of opposition by Republicans.
Sarin reported that the IRS has collected more than 130 million tax returns from individuals and businesses this year, and that it had disbursed more than $220 billion in refunds. The average refund, as of the week of April 8, was $3,175, 9.9 percent higher than in 2020. Accounting Today said the increase was likely due to several credits that were expanded under President Joe Biden’s $1.9 trillion American Rescue Plan.
According to Accounting Today, one surprise of the tax season was the IRS’s focus on digital assets, including digital currencies and nonfungible tokens. The agency included reporting requirements for acquisitions and sales of such assets prominently on individual tax return forms. Another development has been a significant increase in taxpayer ownership of stock, in part because of services such as Robinhood, which enable users to buy and sell stock through an app. Stock ownership usually calls for additional forms and adds to the complexity of tax returns.