How exactly did the IRS do in the most recent tax season?
While the politicians debate how much money it should have, the IRS cranked dutifully away this past tax filing season. The agency says it operated on schedule ...
While the politicians debate how much money it should have, the IRS cranked dutifully away this past tax filing season. The agency says it operated on schedule for the first time since 2020, the advent of the pandemic. The Treasury Inspector General for Tax Administration tracked the season closely. With what it found, Assistant Inspector for Audit Diana Tengesdal.
Interview Transcript:
Tom Temin And you have statistics through the end of March. So that’s a pretty good picture of most of the filing season. Were they pretty good relative to historical levels of service?
Diana Tengesdal I would say they were tracking pretty good, yes. Our statistics for this report were as of the beginning of March, March 3rd of 2023. So number of returns received was 54.9 million compared to last filing season, at the same timeframe of 54.7 million. In terms of refunds that were that volume of refunds on those tax returns was 42 million compared to about 38 million last year at the same time. And then the total refunds that were issued this year totaled 127.3 billion, compared to 129.2 billion last year. And then I know another statistic that most individuals are interested about is the average refund amount. And as of March 3rd, 2023, the average refund amount on individual tax returns was $3,028 compared to last filing season, which was $3,401.
Tom Temin Well, I guess one thing we can deduce is that Americans are creatures of habit with respect to withholding and filing deadlines, it sounds like. But what about the turnaround of the processing? I mean, this was the issue in the pandemic because of whatever a million reasons, including some of the paper that got stuck. But electronically is the turnaround pretty much as the IRS would like it to be, according to its own metrics.
Diana Tengesdal For the electronically filed or returns the turnaround time as is generally the way they would like it to. However, as it relates to paper return processing, IRS received as of March 3rd, 2023, the IRS received about 1.4 million paper filed individual tax returns compared to 1.5 million last year. Moreover, the IRS carried over fewer paper filed individual tax returns that did not complete processing at the end of calendar year 2022, they carried over 437,000 paper filed individual tax returns into the start of this filing season. That compared to 4.7 million tax returns for the same timeframe as of last year. And I’m happy to say that as it relates to those paper file tax returns that the IRS carried over, IRS was able to process that carryover inventory by February 4th of 2023, which was about one and a half weeks subsequent to the start of the filing season.
Tom Temin Right. So there’s a big backlog that had built up for a variety of reasons. It seems like they’re pretty much back to the paper processing that they had before the pandemic.
Diana Tengesdal Well, the IRS cleared the carryover of individual paper tax returns that were waiting to be processed. However, they do continue to have backlogs and other tax processing related programs, for example, rejected returns. That’s when a return cannot be processed because it’s missing information or there’s incorrect information on the tax return. And the IRS needs to correspond with the taxpayer and wait for the taxpayer to respond and provide them with information at which time then they can resolve the error and continue processing the tax return. And IRS is also behind on processing amended individual tax returns.
Tom Temin All right. We’re speaking with Treasury inspector general for tax administrations, acting Deputy IG for audit Diana Tengesdal. I would just want to pull on the paper for one second at one time. Many years ago, the IRS was entirely paper. Can they process paper in general, do you think now? As fast as they could when the whole thing was paper and they have these vast operations and desks with 15 trays around the perimeter of this kind of thing? I mean, what does it look like in the modern era for them?
Diana Tengesdal As you may know, the IRS is undergoing a lot of transformation and they’re looking to expand on some of their efforts to digitize tax returns, part of some federal mandates, so they could refer to those as their scanning initiatives. And that’s going to help them in terms of modernizing their overall tax return processing efforts. As it relates to the paper file tax returns.
Tom Temin Right. I know one of the digitazation efforts they’re looking at is, trying to scan paper documents and turn it into machine readable data. I think they’re having step by step progress there.
Diana Tengesdal That is correct.
Tom Temin And let’s talk about customer service with respect to the telephones that’s been bedeviling them. But the reports are now that they’re recovering their ability to answer the phone and to get people a correct answer in some kind of a timely fashion. Did you look at that and what did you find so far?
Diana Tengesdal So we did look at the IRS telephone measures. And as of March 4th, 2023, we found that the level of service that the IRS was providing was 80.6% compared to the same time frame in 2022, in which the IRS provided only a 19.5% level of service. And level of service calculates the level of service taxpayers have at speaking with an assister. That is a measure IRS uses that does not reflect overall call demand for telephone assistance and that does not reflect the quality of the answers being provided via the phone. In terms of wait times this year, as of March 4th, it was 5 minutes compared to the same time frame last year, which was 24 minutes. So definitely much better than what they had done in the prior year. As it related to the correct answer, our review did not evaluate whether the IRS was providing taxpayers with a correct answer. However, tipped as a whole has work in this area that they’re going to complete on the quality of phone assistance, where they’re going to look at the accuracy, professionalism and if taxpayers are being provided timely assistance to address their matters. And that’s work that we have planned this year that will likely finish sometime in the coming months.
Tom Temin And those favorable statistics on the level of service at 80.6%, the reduction in speed of answer comes as the number of calls between 2022 and 2023 really rose substantially. It looks like there was another golly, almost a half a million more calls, more than almost almost three quarters of a million more calls.
Diana Tengesdal That is correct.
Tom Temin Well, then, is the IRS back to where it should be in in totality?
Diana Tengesdal Well, let let me answer this by saying that the IRS has definitely made significant progress to reduce its tax return inventories closer to pre-pandemic levels and to provide service to taxpayers. As we noted in our report, iRS management stated that for the first time since the pandemic, individual tax return processing and related activities are returning to normal timeliness goals. That’s something that they haven’t had happen for the last several years because of the pandemic.
Tom Temin And would it be accurate to say they have done this even though they are not really back to the full staffing that they’re authorized and funded for?
Diana Tengesdal That would be correct.
Tom Temin And now we have talked about the statistics through the beginning of March. You are examining what happened for the full tax season. And that report is going to be some months ahead, correct?
Diana Tengesdal That is also correct, yes. We are continuing our work to evaluate the remainder of the filing season and will provide updated statistics in the report that we plan to issue later this calendar year.
Tom Temin But in the absence of some catastrophic event, which we don’t, which we know didn’t happen so far as anyone can tell, nothing bad happened. It sounds like those numbers are likely to bear out when you look at the full season.
Diana Tengesdal Yes, that would be correct. I don’t expect there to be any significant differences.
Tom Temin And maybe just a quick question on the levels of fraud detection. I mean, this is something they’ve made a lot of progress on also over the years, and electronics has helped a lot with that. What’s what should we know about the activities on the fraud and fraud detection and fraud prevention front.
Diana Tengesdal That the IRS continues to increase the number of fraud, fraudulent tax returns that they detect and stop from entering in the tax processing system. As of January 2023, the IRS locked taxpayers accounts of 52.5 million deceased individuals, compared to 49.1 million accounts blocked as of December 31st, 2021. And just to explain for the listeners what that means when a tax account is locked, the e-filed tax return is rejected and a paper tax return is prevented from posting to that taxpayer’s account. And that’s really important as it relates to a deceased individual so that an unscrupulous person doesn’t try to steal that individual’s identity to file a tax return in their name and likeness.
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Tom Temin
Tom Temin is host of the Federal Drive and has been providing insight on federal technology and management issues for more than 30 years.
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