The Treasury Department and the IRS announced on March 10, 2022, that they are addressing the backlog of unprocessed returns by hiring thousands of new employees, creating a new "surge team" to handle paper returns and increasing automated processing.

Recent figures show 23.5 million returns and correspondence (e.g., EIN-related matters, penalty-abatement requests and power-of-attorney processing) awaiting IRS action. In addition to the delays taxpayers are experiencing if their documents are in that backlog, staff shortages are also making it difficult to reach a customer service representative on most IRS hotlines.

According to Treasury and the IRS, the backlog stems from underfunding, staff shortages and having to administer several new financial relief programs in response to the pandemic.

As such, the agencies announced that they are taking several actions, including:

• Shifting approximately 700 employees to a new surge team that will process new paper returns
• Continuing the 800-person surge team that was created in February 2022 to process amended returns and taxpayer correspondence
• Hiring thousands of new employees and contractors
• Using a new automated tool that can resolve errors on tax returns, avoiding the necessity for manual review
• Suspending many individual and business notifications that are usually sent when a taxpayer has not complied with filing requirements (see Tax Alert 2022-0243)

At the same time, the IRS announced that it was hiring 5,000 employees at its three processing centers in Texas, Missouri and Utah and new hires may expected to start working within 45 days of their job offer.

Implications

These actions are positive steps that should help to reduce the backlog. Some of them will have more immediate effect; some will take longer. The IRS expects normal inventory levels by the 2023 filing season, which means the agency expects near-term customer-service delays and difficulties to persist.

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