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Taxpayer Advocate urges more tax e-filing options; IRS provides additional electronic 1040-X forms

Electronic efiling tax returns computer keyboard

A constant and continual message from the Internal Revenue Service is that more of us should electronically file our returns.

But, says the National Taxpayer Advocate, the agency isn't making e-filing easy enough.

The Internal Revenue Service IRS offers more electronic amended filings, just day after Taxpayer Advocate says agency's e-filing options are lacking

Among the many issues National Taxpayer Advocate Erin M. Collins cited in her latest report to Congress is limited e-filing options, for both annual returns and amended ones,

The IRS answered that charge at least a little today, announcing that it has expanded e-filing options for amended tax returns.

E-filing growing, but not enough: Yes, most individual taxpayers do e-file their annual returns. That figure now exceeds 90 percent.

But around 17 million taxpayers filed paper 1040 forms, noted Collins in her Objectives Report to Congress for fiscal year 2023, released June 22.

Paper filing was a personal decision for some. Others, however, don't have a choice.

"Some have no choice because they encounter e-filing barriers, such as when they are required to file a tax form or schedule the IRS cannot accept electronically," said Collins in her report. That's creating an undue burden on those filers.

"Before the pandemic, the IRS typically delivered refunds to paper-filers within four to six weeks. Over the past year, refund delays on paper-filed returns have generally exceeded six months, with delays of 10 months or more common for many taxpayers," Collins wrote.

Paper poses problems to backlog resolution: Collins also chastised the IRS for failing to make progress in eliminating its paper backlog, primarily because "its pace of processing paper tax returns has not kept up with new receipts."

Although the IRS has said it hopes to eliminate its COVID-related backlog by the end of this year, Collins is skeptical.

"The math is daunting," she wrote. Here's Collins' math from the report:

During the month of May, the IRS processed an average of about 205,000 individual income tax returns per week. Its Form 1040 backlog at the end of May stood at 8.2 million, with millions more paper tax returns not yet classified or expected to arrive before the extended filing deadline of Oct. 17. The IRS would have to process well over 500,000 Forms 1040 per week, more than double its current pace, to eliminate the backlog this year.

Amended processing issues, too: Individual original 1404 forms are just one component of the paper tax returns processing backlog.

Collins said millions of business tax returns and amended tax returns, both individual and business, are also filed on paper. The overall backlog has increased by 7 percent over the past year.

Status of Unprocessed Paper Tax Returns
Comparing Weeks Ending May 22, 2021, and May 27, 2022
Unprocessed Paper Tax Returns May2021-May2022_IRS Taxpayer report June 2022

I'm not picking sides — or, as a reader once accused me, a tool of the IRS — but Uncle Sam's tax agency has and is still dealing with extraordinary circumstances due to the COVID-19 pandemic. We all are. And yes, the IRS needs to do better.

But the IRS also has dealt with budget cuts and staff attrition for years. Those have been hurdles in improving customer service. Collins acknowledges the IRS practical problems, in this and prior reports. But as is her job, she's pointing out where the agency needs to improve.

Let's hope that soon will happen, with the end of coronavirus challenges and a bigger IRS budget.

More electronic X-filing: Meanwhile, the IRS is taking another e-filing step, albeit a small one in connection with amended tax returns.

The IRS today, June 23, announced that it now will accept more electronically amended returns. Since 2020, the IRS has accepted corrections to Form 1040 via certain e-filed 1040-X forms. Forms 1040 and 1040-SR can still be amended electronically for tax years 2019, 2020, and 2021.

Now, the IRS also will take e-filed corrections to Form 1040-NR, U.S. Nonresident Alien Income Tax Return (that's a snippet of the 2021 tax year form is shown below) …

IRS Form 1040-NR 2021

See more tax forms and more about them at Talking Tax Forms.

… as well as to Forms 1040-SS, U.S. Self-Employment Tax Return (Including the Additional Child Tax Credit for Bona Fide Residents of Puerto Rico) and Forms 1040-PR, Self-Employment Tax Return – Puerto Rico.

In addition, the agency has added a new, electronic checkbox to Forms 1040/1040-SR, 1040-NR and 1040-SS/1040-PR to indicate that a superseding return is being filed electronically. A superseded return is one that is filed after the originally filed return but submitted before the due date, including extensions.

The amended return electronic changes "will further help people needing to make corrections. This development will also assist the IRS with its inventory work on the current backlog of amended returns," said IRS Commissioner Chuck Rettig. "This is another tool we're using to help get us back on track."

About 3 million Forms 1040-X are filed by taxpayers each year, according to the IRS. After filing an amended return, taxpayers can check on its status by using the IRS' online Where's My Amended Return? tool.

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