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As Capitol Hill focuses on tax season challenges, IRS decides to keep Texas processing center open

Late_Tax_Returns_dismayed-taxpayer (2)
Many taxpayers (and tax professionals) have felt frustrated in trying to get help from the IRS over the last few COVID-stricken years.

It's not officially Kick the IRS While It's Down Day, but it seems like it.

At a Senate Finance Committee hearing today on Internal Revenue Service customer service issues, the consensus, to put it as kindly as possible, is that it's not good.

Critics of the IRS and those simply exploring ways to help the agency improve its operations didn't have to look far for problems.

"By any measure, the 2022 tax filing season is shaping up to be the most challenging and frustrating in decades, on the heels of challenging 2020 and 2021 filing seasons," said Sen. Mike Crapo (R-Idaho), Ranking Member of the U.S. Senate Finance Committee, in his opening remarks. "In 2021, just over one in ten Americans was ever able to reach the IRS by telephone. More than 250 million calls to the IRS went unanswered in 2021. Those who did manage to get through spent more than 23 minutes on hold, to say nothing of the lengthy waits spent by those who could not get through at all."

The customer service contact problems, which are a recurring complaint, were exacerbated by the IRS' COVID-19 precautions. The agency temporarily shut down most of its operations in 2020, shifting to remote work by IRS staff whose positions were able to be completed that way.

The IRS office closures also created an even larger problem. The historic backlog of tax filings is well known, but instead of shrinking, the numbers keep growing. The latest, and most alarming, count is nearly 24 million taxpayers who are still waiting for the IRS to process their tax returns from last year.

Testimony underscored issues: Jessica Lucas-Judy, Director, Strategic Issues at the Government Accountability Office (GAO), bolstered her testimony with a just-released report on the IRS' Efforts to Address Persistent Challenges.

The IRS basically faces the same issues every filing season. But, as the GAO graphic below from its latest report shows, the problems for the agency and taxpayers were ramped up last year.

GAO IRS 2021 filing season challenges report 021722 graphic

The third column spotlights the tax paperwork backlog.

"Our preliminary analysis indicates that IRS's inventory of taxpayer correspondence as of the end of the 2021 filing season was nearly three times the average inventory compared to the same time period from 2016 through 2019," according to Lucas-Judy in the report.

The IRS correspondence inventory — or as we regular folks characterize it, backlog — at the start of 2022 was expected to exceed 10 million by the end of fiscal year 2022, noted the report. This is more than five times IRS correspondence backlog at the end of fiscal year 2019, and more than three times the inventory as of the end of fiscal year 2020.

"This backlog will be difficult to manage as IRS balances prioritizing telephone calls from taxpayers with reducing the volume of correspondence such as amended returns from 2021 and incoming correspondence for 2022," added the report.

Keeping Austin open: That backlog is why, probably not coincidentally, that as the Senate Finance Committee hearing was underway, the IRS announced that it has put on hold a previously planned facility closure.

For the last several years, the tax agency has been trying to save dollars by consolidating operations. This means some IRS campuses have taken on new jobs or closed. Such a closure was planned in 2024 for its Austin, Texas, facility.

That planned, but now delayed, closure would have followed the IRS' Submission Processing (SP) site consolidation strategy enacted in 2016. This plan dealt with paper processing workforce needs.

As more taxpayers file electronically, the merging and centralizing of paper processing was seen as a smart move that could streamline the IRS, improve its efficiency and customer service, and, last but definitely not least, save money.

Under the SP Consolidation initiative, IRS operations in Covington, Kentucky, which is in the greater Cincinnati, Ohio, area, and Fresno, California, were closed in 2019 and 2021, respectively. The planned 2024 closure of the Austin, Texas, facility would have left the IRS with two processing sites, in Kansas City, Missouri, and Ogden, Utah.

Now, with millions of backlogged returns, the IRS has changed direction. In a statement issued today, Feb. 17, it said:

"To ensure there is sufficient capacity to best serve the nation's taxpayers the IRS now believes having three SP sites is the best approach. As a result, the IRS decided to cancel the Austin consolidation when it completed its annual review in January of 2022. While the decision to keep Austin open is based solely on the results of the revalidation analysis, it also aligns with feedback received during a recent audit conducted by the Treasury Inspector General Tax Administration as well as concerns expressed by the Taxpayer Advocates Office and the National Treasury Employees Union."

If the Austin operation and its staff in the clear? At least for the foreseeable future. But when we eventually get past the coronavirus pandemic and back to a more normal tax season, things could change.

More on IRS operations: The Treasury Inspector General for Tax Administration (TIGTA) report mentioned in today's IRS statement, "Plans to Close the Austin Tax Processing Center Should Be Halted Until Hiring Challenges and Substantial Backlogs at Remaining Centers Are Addressed" has more on the now halted plan.

You also can check out the other testimony from today's Senate Finance Committee hearing on IRS operations. In addition to Crapo's statement and the GAO testimony by Lucas-Judy mentioned (and linked) earlier in this post, you can SFC Chairman Sen. Ron Wyden (D-Oregon) opening statement, as well as testimony from National Taxpayer Advocate Erin M. Collins, and Jan Lewis, Chair of the Tax Executive Committee for the American Institute of CPAs.

You also can watch the videotape of the hearing posted by Senate Finance Committee. The tape started early, so move your cursor to the 21 minute, 30 second mark to get to the start of the session.

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