The IRS Enhances its Performance with Gradual Reforms, Yet Increased Funding Drives Stronger Enforcement.

What to Expect for the 2023 Tax-Filing Season

The Internal Revenue Service’s Efforts to Improve

As the 2023 tax-filing season begins, the Internal Revenue Service (IRS) has made efforts to enhance its services
and reduce the challenges taxpayers have faced in recent years. With funds allocated by the Inflation Reduction
Act, which was passed in 2022, the IRS is working towards improving its operations. Over the next ten years,
$80 billion will be allocated to the agency, starting in 2023. In the past, the IRS has struggled to fulfill its
responsibilities due to underfunding. Office closures and temporary tax rule changes during the pandemic further
worsened the situation, causing delays in phone services, backlogs in processing refunds, and historical lows in
audit rates. While there have been some recent improvements, such as shorter wait times, the IRS is still not
operating at pre-Covid levels.

Better Phone Service, But Not Without Spotty Availability

Although the IRS aims to improve upon the previous tax season, where only 29% of taxpayers reached a live agent
when calling the main phone line (up from 12% in 2022), most callers are likely to be directed through the IRS’s
automated phone system. While the IRS has expanded its automated phone system to answer more taxpayer questions,
it does not measure user satisfaction levels. To increase the chances of connecting with a live agent, it is
advisable to call early in the tax season before the rush of filings.

Delays for Some Taxpayers

For taxpayers who only need to file a 2023 Form 1040 and receive a refund, the good news is that the massive
backlogs that caused refund delays in previous years have been eliminated. However, there are still significant
backlogs and delays for taxpayers filing amended tax returns or corresponding with the IRS. As of late October,
the IRS had over 1.9 million amended tax returns and 54.3 million correspondences pending, compared to 500,000
and 1.9 million respectively at the end of 2019. Some issues have been unresolved for years, causing significant
frustration for taxpayers.

Improved Online Tools for Taxpayers

The IRS has upgraded its online resources to provide individual taxpayers with better tools for answering
questions, tracking refunds, organizing documents, and interacting with the agency. These improvements aim to
reduce the reliance on live agents and the postal system when dealing with the IRS. The popular refund tracker,
“Where’s My Refund?”, has also undergone improvements to provide more detailed messages and reduce confusion
among users.

Greater Scrutiny and Stricter Enforcement

The IRS has intensified its enforcement efforts, primarily targeting partnerships with assets over $10 million and
individuals with income over $1 million and tax debt exceeding $250,000. However, taxpayers at any income level
may receive notices from the IRS. After suspending collection notices for underpaid taxes in early 2022 as part
of pandemic relief, the IRS has resumed sending notices. Taxpayers who believe a notice has been sent in error
can request a hold on the payment demand while gathering evidence. Although some hold requests have been denied
recently, the IRS has granted penalty relief on underpayments totaling approximately $1 billion for eligible
individual taxpayers earning less than $100,000 a year and owing less than $100,000 for the 2020 and 2021 tax
years.

For more information, please contact editors@barrons.com.

Read More of this Story at www.barrons.com – 2024-02-03 07:00:00