IRS, taxpayers face host of challenges ahead of July 15 deadline

The IRS and taxpayers face a slew of challenges ahead of the impending July 15 tax filing deadline, including a backlog of paper returns.

In March, the Treasury Department extended the tax filing deadline from April 15 to July 15 as a result of the coronavirus pandemic, which dragged the nation's economy into the worst downturn since the Great Depression.

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IRS Commissioner Charles Rettig, while testifying before the Senate Finance Committee last week, said the tax-filing deadline would not be extended further, despite some pressure from advocacy groups to push the date until October.

During the pandemic, the agency continued to process electronic returns and issued refunds via direct deposits.

But Rettig acknowledged the tremendous backlog created when, in mid-March, the IRS directed most of its employees to work remotely, bringing a host of the agency's typical functions to a grinding halt. The overflow was so great that the IRS had to rent tractor-trailers and separate storage space to store the documents until workers could return and start sorting through them, Nina Oldson, the director of the Center for Taxpayer Rights, told NPR.

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Rettig said that the IRS has 12.3 million pieces of mail, some of which include paper returns. He said the IRS is processing roughly one million paper returns a week.

“We are in the process of a phased-in reopening of some of our operations when and where it is safe to do so,” he said during the testimony. “In this regard, we are processing paper returns. We are tackling the backlog of mail and reopening our phone lines. We are prioritizing refunds and customer service operations.”

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Taxpayers who filed before the April deadline in hopes of receiving a refund have experienced lengthy delays in receiving their money, according to a recent report.

"While the overwhelming majority of taxpayers file electronically, taxpayers who file paper returns are experiencing extreme delays in processing their returns," the report to Congress, authored by Erin Collins, said. "Many taxpayers are facing financial hardship associated with the COVID-19 crisis and need the IRS to process their paper-filed returns as soon as possible and release their refund."

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As of June 26, the IRS had processed about 128.5 million returns, down 10.6 percent from last year. By comparison, It had received about 140 million returns, a drop of just 3.5 percent from the same time last year. The agency has issued roughly 93 million refunds so far, down 10.3 percent from this point in 2019.

Taxpayers also had access to fewer resources because the agency shut down many of its telephone lines and its centers. Rettig said he expects the agency's processing facilities and call centers to all be open by mid-July even as employees continue to adheare to social distance rules. There are roughly 50,000 IRS employees still telecommuting, he said. The agency employs a little more than 73,500 individuals full-time, according to data from 2019.      

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