U.S. IRS clears massive backlog of unprocessed paper tax returns

On Tuesday, the IRS announced that it had completed its first “normal” tax filing season since the 2020 COVID-19 epidemic, clearing a backlog of millions of returns from previous years.

additional IRS Commissioner Danny Werfel told reporters that $80 billion in additional IRS funding bought new scanning technology that digitizes and processes paper returns swiftly.

In 2020 and 2021, COVID-19 caused three-month and one-month filing delays. The National Taxpayer Advocate’s office reported that by February 2022, 23.5 million individual and business tax forms needed manual processing due to delays and manpower shortages.

Werfel said the IRS hired 5,000 new taxpayer service agents to reduce call waiting times before the 2023 tax season, which has a midnight Tuesday filing deadline. With the new scanning technology, it was able to clear the backlog of all error-free returns, leaving only those with questions, audits, or other issues to be resolved.

A Treasury official said the IRS ended 2022 with 1.4 million unprocessed individual and corporate returns, which were cleared by mid-March.

The IRS aims to hire over 20,000 new employees over two years using cash from the climate-focused Inflation Reduction Act, including 5,000 taxpayer services employees.

In exchange for lifting the $31.4 trillion U.S. debt ceiling, House Republicans want to eliminate $80 billion in IRS budget.

The cash, on top of the agency’s regular operating budget, would improve taxpayer services, enforce and audit rich taxpayers and business partnerships, and modernize computer systems.

Werfel said the cash was making a “immediate, meaningful difference to deliver the service American taxpayers deserve on the phone, in person and online” and will improve over time.