IRS Reduces Backlog, Plans To Resume Collection Notices
The IRS recently posted an update stating it has processed all paper and electronic individual returns received prior to January 2023 and is now opening mail within normal time frames. The IRS clarified this means it has processed all returns received for tax year 2021 or earlier if those returns had no errors or did not require further review.
As of May 13, 2023, the IRS had 4.2 million unprocessed individual returns. These include tax year 2022 returns, 2021 returns that need review or correction and late filed prior year returns. Of these, 2 million returns require error correction or other special handling, and 2.2 million are paper returns waiting to be reviewed and processed. This work does not typically require the IRS to correspond with taxpayers, but it does require special handling by an IRS employee, so in these instances it is taking the IRS more than 21 days to issue any related refund.
For returns received in the current year, the IRS processes individual tax returns for which refunds are due first. Tax returns reflecting tax owed are processed last, but if a payment is mailed with the tax return, the payment is separated upon receipt and deposited to ensure the taxpayer account is credited for the payment. The IRS continues to process tax returns that need to be manually reviewed due to errors in the order received.
As the return is processed, whether it was filed electronically or on paper, it may be delayed because it has a mistake, is missing information, or there is suspected identity theft or fraud. The IRS said that if it can fix the issue without contacting the taxpayer, that will be done. If the IRS needs more information or needs the taxpayer to verify they sent the tax return, the agency will send a letter. The resolution of these issues could take more than 120 days depending on how quickly and accurately the taxpayer responds and how quickly the IRS can complete the processing of the return. Taxpayers are encouraged to check Tax Season Refund Frequently Asked Questions.
In most instances, no further action is needed. The IRS will contact taxpayers by mail if it needs more information or if the IRS made a change to the return. If the taxpayer filed electronically and received an acknowledgement, they do not need to take any further action other than promptly responding to any requests for information.
However, if the taxpayer is due a refund, filed on paper more than six months ago, and Where’s My Refund? does not indicate the IRS received the return, the taxpayer should resubmit the tax return, electronically if possible. They should make sure it includes an original signature and include all documents submitted with the original return.
In all other cases, the IRS advises taxpayers to not file the tax return again and to check Where’s My Refund? or their Online Account for possible updates.
As of May 13, 2023, the IRS had 1.43 million unprocessed Forms 1040-X. The IRS is processing these returns in the order received, and the current timeframe can be more than 20 weeks. The IRS advises to not file the same return more than once. Taxpayers should continue to check Where's My Amended Return? for the most up-to-date processing status available.
At a recent American Bar Association tax conference panel in Washington, D.C., IRS Deputy Commissioner for Collection and Operations Support Darren Guillot announced that some collection notices will resume after being paused last year.
Guillot said no start date has been set yet and that the collection notices will gradually resume. The IRS said the pause had affected "several million balance due accounts from the 2022 filing season, as well as other balances.”
Guillot estimated that from the end of May to early June, about 5 million to 8 million CP14 notices, which inform taxpayers of how much they owe after filing their taxes, will be sent to taxpayers.