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IRS Commissioner Says 2022 Filing Season Had Strong Start, Despite Backlogs from Last Year

By:
Ruth Singleton
Published Date:
Mar 18, 2022

IRS Commissioner Charles Rettig

In testimony before the House Ways and Means Committee Thursday, IRS Commissioner Charles P. Rettig, while acknowledging continuing backlogs of paper returns from last year, said that the 2022 filing season has gotten off to a strong start with regard to tax return processing and the operation of its information technology (IT) systems. “Through March 11, the IRS received more than 63 million individual federal tax returns and issued more than 45 million refunds totaling more than $151 billion,” he said. “Refund returns continue to be processed on a priority basis ahead of returns with a balance due or full payment of the underlying liabilities.” 

“Taxpayer service remains the most significant IRS priority, and we have implemented many new, innovative strategies in an effort to improve our overall level of service and processing of our unprecedented current and projected inventories,” Rettig said. “The pandemic presented the IRS with a confluence of novel and critical demands on the same set of limited resources, with similar levels of urgency and priority. In response, although we may not have always gotten it right or supported the important priorities of some, our employees have worked extremely hard to respond as best we could to a never-ending string of compounding challenges. 

Rettig acknowledged an increase in funding to the agency in the spending bill recently approved by Congress but said that Congress should do more. “Although the IRS appreciates the $675 million increase to our budget in the FY 2022 Omnibus, funding constraints remain a barrier to addressing the current paper inventory and supporting our IT operations adequately,” he said.  "We are exploring all options to move funds to meet today’s immediate challenges but doing so is a short-term solution for a long-term structural funding problem that only Congress can help us address.” 

He cited as an example the agency’s Operations Support account, the account that funds all of the hiring, rent, laptops, and telecom for taxpayer services and enforcement employees, saying that this year’s funding left it $100 million short of its inflationary cost increases. 

“[W]e are left depleting resources from one less-visible program to pay for another essential program, which causes us to slow or stop work on updates to our systems that must be modernized to provide digital services that citizens expect from us,” he said. “Mandatory multi-year, consistent funding—the $80 billion proposal under consideration by you and your colleagues—would help us deliver meaningful services to taxpayers, conduct critical enforcement initiatives and support long-term modernization efforts to improve both service and compliance for the nation.” 

Rettig specifically addressed last year’s backlog in paper returns resulting from the pandemic, when many IRS employees were working remotely. “The IRS continues to focus on working to reduce paper correspondence inventory and process paper tax returns from 2021 as well as improve our response to an unprecedented level of phone demand – situations that have been compounded by the pandemic and related issues,” he said. “In Fiscal Year (FY) 2021, we received more than 15 million individual paper returns.“ 

Rettig noted that the IRS had “a significantly higher error rate on individual returns mostly due to the inability of taxpayers to accurately reconcile their actual Economic Impact Payments (EIP) and claims utilizing prior year income (2019 versus 2020) for the Earned Income Tax Credit (EITC)."

He explained, "We received far more than 10 million returns where the taxpayer failed to properly reconcile the two EIPs received in 2020 to the amount of the Recovery Rebate Credit (RRC) stated on their return filed in 2021. Similarly, more than 10 million individuals reported unemployment compensation on their return that was subject to the exclusion enacted during the 2021 filing season. In addition, millions of taxpayers elected to use 2019 rather than 2020 as the base year for determining their EITC (and the legislative change for that was enacted after our IT development for the 2021 filing season had been completed). Each of these returns required a manual review and resolution by an IRS employee."

Accounting Today reported that members of Congress told Rettig about the complaints they have been hearing from their constituents about the difficulty they have in reaching the IRS to resolve their problems. 

Members of Congress also asked Rettig about the agency’s audit rate for both corporate and individual taxpayers, according to Accounting Today. Rettig acknowledged that the IRS often lacks the financial resources of large corporations. “We do not have the resources to go after the bigs or the superbigs, as we refer to them, and we get outgunned routinely in that space,” he said.

But he criticized a recent report from Syracuse University’s Transactional Records Access Clearinghouse that found that the IRS audited low-income workers at a rate five times higher than everybody else. Rettig strongly denied the findings, citing statistics from the IRS Data Book. “That report from Syracuse University is absolutely 100 percent false,” he said. “I’m tired of having to deal with this issue. We audit high-income taxpayers more than any other category in the Internal Revenue Service. Taxpayers reflecting over $10 million of income are audited at a rate exceeding 7 percent. Taxpayers at the $25,000 level, which is primarily the Earned Income taxpayer, would be the only people we would look at, are audited at 1.1 percent. Those are correspondence audits.” 

When asked about requests by the AICPA and other CPA organizations for penalty relief and the suspension of automated tax notices, Rettig said, “The point on the automated notices, those were stopped. He added, "If somebody has received one recently, I would like to have that notice and find out because all of those automated notices stopped months ago, so we have addressed virtually everything. ... Nothing is off the table for us to consider.”

According to Accounting Today, Rettig said that he and other IRS officials regularly meet with the AICPA and other groups to hear their concerns, and he considers them friends, having worked as a tax attorney before joining the IRS. “The people that provide the letters and lobby you hard know the answers to the questions they have you ask me,” he said.

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