RETTIG TESTIMONY BEFORE CONGRESS:
The IRS remains plagued by a high error rate on backlogged 2021 individual mail-in returns, mostly due to taxpayers' inability to reconcile their Economic Impact Payments (EIP) and claims using prior-year figures for the Earned Income Tax Credit (EITC), Commissioner Charles Rettig said.
The enormous mail backlog that has consumed the IRS’s resources and been at the root of many taxpayers’ issues will be cleared by the end of the year, according to IRS Commissioner Charles Rettig. “Absolutely before December,” Rettig assured lawmakers during a March 17 House Ways and Means Oversight Subcommittee hearing. “If the world stays as it is today, we will be healthy by the end of calendar year 2022,” he said, referring to the backlog’s status.
"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," he told a House Ways and Means subcommittee hearing March 17 on the status of the 2022 filing season.
Given that more than 10 million returns failed to properly reconcile two EIP payments received in 2020 on their returns filed during the 2021 filing season, Rettig said it's critical that individuals and their preparers verify the possibly six to eight payments received in 2021 before submitting a 2021 return this year. The IRS sent more than 100 million letters to help taxpayers match agency records to prevent delays in processing, according to the commissioner. IRS Letter 6475, Your Third Economic Impact Payment, and IRS Letter 6419, 2021 Advance Child Tax Credit, provide the amounts that individuals received in 2021.
At the same time, the IRS has experienced delays in updating its information technology systems, which means the IRS and taxpayers must continue to use certain paper-based processes, Rettig testified.
"This use of paper processes can result in significant delays, contributing to IRS inventories and limiting taxpayers' ability to know the status of their cases," he said.
When asked by committee member Kevin Hern, R-Okla., if the IRS was considering providing penalty relief — a top priority of tax professional organizations like the American Institute of CPAs and the broader taxpayer relief coalition — Rettig stopped short of making any promises, saying instead that the IRS is aware of that request and that “nothing is off the table for us to consider.”
In Rettig’s prepared testimony submitted to the subcommittee, he noted that the IRS is evaluating its options for penalty relief, but he cautioned that it’s still unclear if that could even be accomplished with systemic programming changes or if it would require manual intervention. The latter would sap resources from the backlog-clearing effort, “which complicates this area,” the statement says.
Although the agency received a $675 million increase to its budget in the fiscal 2022 omnibus spending legislation, funding constraints remain a barrier to addressing the current paper inventory and supporting IT operations adequately, according to Rettig.
