National Taxpayer Advocate has released the statutorily mandated midyear report to Congress. The report expresses concern about continuing delays in the processing of paper-filed tax returns and the consequent impact on taxpayer refunds. At the end of May, the agency had a backlog of 21.3 million unprocessed paper tax returns, an increase of 1.3 million over the same time last year.
Backlog of Unprocessed Paper Tax Returns
More than 90% of individual income taxpayers e-file their returns, yet last year, about 17 million taxpayers filed their returns on paper. Some choose to file on paper. 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. 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.
The report says the IRS has failed to make progress in eliminating its paper backlog because “its pace of processing paper tax returns has not kept up with new receipts.” During the month of May, the IRS processed an average of about 205,000 individual income tax returns (Forms 1040) 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 October 15.
Forms 1040 are just one component of the paper tax returns processing backlog. 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% over the past year.
The report credits the IRS with taking recent steps to address the backlog but notes “missed opportunities” to have acted earlier. “The IRS’s paper processing delays were evident more than a year ago, and the IRS could have addressed them more aggressively at that time,” Collins wrote. “Had the IRS taken steps a year ago to reassign current employees to processing functions, it could have reduced the inventory backlog carried into this filing season and accelerated the payment of refunds to millions of taxpayers. Had the IRS implemented 2-D barcoding, optical character recognition or similar technology in time for the 2022 filing season, it could have reduced the need for employees to engage in the highly manual task of transcribing paper tax returns. Had the IRS quickly used some of the $1.5 billion of additional funds provided by the American Rescue Plan Act of 2021 (ARPA), which was enacted 15 months ago, to hire and train additional employees, it could have worked through the backlog, answered more taxpayer telephone calls and otherwise improved taxpayer service.
“At the end of May 2021, the IRS had an additional 15.8 million returns that had been suspended during processing and required manual review by IRS employees. The suspended returns consisted largely of e-filed returns on which taxpayers claimed Recovery Rebate Credit amounts that differed from the allowable amounts shown on IRS records. As of May 2022, the IRS had reduced the number of suspended returns to 5.4 million. The report credits the IRS with developing procedures to reduce delays among suspended returns, in part by automating the review process. However, e-filed returns suspended during processing did not generally result in extended refund delays. By contrast, unprocessed paper-filed tax returns have resulted in refund delays of six to 10 months or longer.
New Business Mileage Rate effective July 1st, 2022
From 58.5 cents a mile to
62.5 cents a mile
On June 9, 2022, the Internal Revenue Service issued Announcement 2022-13, increasing the standard mileage rate for the final six months of 2022 from 58.5 cents per mile to 62.5 cents per mile. The new rate will be effective for traveling beginning on July 1, 2022, through December 31, 2022. The old rate of 58.5 cents per mile will remain in
effective through June 30, 2022.
In the IRS’ press release, IRS Commissioner Chuck Rettig noted: The IRS is adjusting the standard mileage rates to better reflect the recent increase in fuel prices. We are aware a number of unusual factors have come into play involving fuel costs, and we are taking this special step to help taxpayers, businesses and others who use this rate.
”The standard mileage rate is a national average rate, which takes into account a variety of factors including fuel costs, depreciation, insurance and other fixed and variable costs.
The business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of tracking actual costs. This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage. Employers continue to have the option to use other methods that calculate the actual costs of using their vehicle rather than using the standard mileage rates.
New Colorado Delivery Fee Effective July 1, 2022, Colorado imposes a retail delivery fee on all deliveries including third party deliveries to a location in Colorado with at least one item of tangible personal property subject to state sales or use tax.
About the Retail Delivery Fee for the State of Colorado
The retailer or marketplace facilitator that collects the sales or use tax on the tangible personal property sold and delivered, including delivery by a third party, is liable to collect and remit the retail delivery fee. Deliveries include when any taxable goods are mailed, shipped, or otherwise delivered by motor vehicle to a purchaser in Colorado.
The retail delivery fee is due at the same time as your sales tax return. Returns are generally filed on a monthly basis and must be filed on or before the 20th day of the month following each reporting period. Retailers permitted to file state sales tax returns on a quarterly, annual, or other basis will file the retail delivery fee return on the same schedule. The retail delivery fee will be reported and paid on a new return, the DR 1786 form. The retail delivery fee is collected state-wide, does not need to be separated by jurisdiction, and is calculated per sale. The retail delivery fee is made up of six different fees for a total of .27 cents a sale. The rates are listed above.
Retailers with an active sales tax account, a retailer license, and any sales tax liability reported after January 1, 2021, will be automatically registered for a retail delivery fee account by July 1, 2022. This applies to both in-state and out-of-state retailers. There is no license required or registration fee due.
2022 Important Dates & Deadlines
In an effort to keep you up to date on all important deadlines, we have put together is a list of deadlines.
January 18, 2022- Quarterly estimated business tax payments for the period from September 1 to December 31, 2021.
January 31, 2022 – Payroll Prior Year Quarterly filings due, Forms W-2/W-3 are due.
February 1, 2022 – Forms 1099 deadline
February 28, 2022- Forms 1099-MISC that do not report NEC in box 7 and that are provided on paper must be submitted to contractors and the IRS.
JFS DEADLINE: February 8, 2022 – 2021 IRS tax returns for partnerships and S corporations are due unless an extension is requested.
- IRS DEADLINE: March 15, 2022
JFS DEADLINE: March 11, 2022 – Tax day! April 15 is an important deadline for many types of tax filing. Individuals and C corporations using the calendar year for accounting purposes must submit their 2021 state and federal tax returns.
- IRS DEADLINE: April 15, 2022
April 15, 2022- First Quarter Estimated Tax Payment Deadline
April 29, 2022 – First Quarter Payroll Tax reports due
JFS DEADLINE FOR CALCULATION: May 31, 2022 -Quarterly estimated business tax payments for the period from April 1 to May 31, 2022.
- IRS DEADLINE June 15, 2022 – Payment Due
July 31, 2022 – Second Quarter Payroll Tax reports due
JFS DEADLINE FOR CALCULATION: August 31, 2022 – Quarterly estimated business tax payments for the period from June 1 to August 31, 2022. Partnerships and S corporations that requested an extension must submit their final 2021 returns by this date.
- IRS DEADLINE September 15, 2022 – Payment Due
JFS DEADLINE: September 23, 2022 -Tax returns due for taxpayers that submitted an extension by April 15.
- IRS DEADLINE October 15, 2022
October 31, 2022 – Third Quarter Payroll Tax reports due
JFS DEADLINE: November 10, 2022- Year-end Meetings must be scheduled by this date.
JFS DEADLINE: December 20, 2022- Requests for 1099, W2, W3, and all year-end filings must be made.
JFS DEADLINE: December 30, 2022- Quarterly estimated business tax payments for the period from Oct 1 to December 31, 2022.
- IRS DEADLINE January 15, 2023-Payment Due
IRS Workloads Affecting Americans
|Just like the rest of us these days, it seems the IRS just has too much to do. And not enough time (or staff) to do it.|
According to their own website, as of November 6, 2021, the IRS still had 6.9 million unprocessed individual returns to look at. In addition, they also had unprocessed amended returns (2.7 million), quarterly payroll tax returns (1.7 million), and amended quarterly payroll tax returns (392,000), among others, and the monthly processing of millions of advance Child Tax Credit payments.
Of course, it’s been a rough couple of years for everyone, including the IRS. Covid-19 shut down the entire country for several weeks and the IRS was no exception. They are still struggling to catch up from the backlog of work that started in March 2020. Add to that the agency’s involvement in numerous Covid relief initiatives since then, and you’ve got one very busy agency.
In the past two years, the IRS has had to deal with:
As a result, the IRS continues to struggle. Their own web page on “IRS Operations during Covid-19” states they are delayed in live phone support, processing paper returns, reviewing e-filed returns and answering other mail.
What are their response times like? The IRS website states it can take:
On top of all that telephone support exists, but there are extremely long wait times due to limited staffing and high call volume. And there is anecdotal evidence on social media that receiving refunds related to certain credits (such as the Employee Retention Credit) can take months from filing through actual receipt.
What does this mean for you? As we work to serve you in a timely manner where the IRS is concerned, just be aware that delays on the IRS side of things may mean it takes longer to get a refund or a response from the IRS. Obtaining information from the IRS as we follow up on certain filings (such as an S Corporation election, for example) will also take longer than it normally has.
In spite of the recent struggles of the IRS, we will continue to brave the hold times on the IRS telephone support system and follow up diligently on previous filings for you. Thank you for your patience during this time!