The Internal Revenue Service announced on Tuesday that it is on the verge of processing all error-free tax returns that it received in 2021, a major milestone for the agency as it wades through an unprecedented backlog of nearly 8 million returns.
While the IRS said it expects to clear out the pile-up by the end of the week, troubles remain for the agency, which still has millions of tax returns from the 2022 filing season that it needs to process. So far this year, the IRS has processed more than 143 million returns, providing roughly $298 billion in refunds to taxpayers.
However, the agency has about twice as many 2022 tax returns as normal that need to be processed, a Treasury Department official told reporters during a call on Tuesday, the result of directing employees' attention to the more-pressing backlog of 2021 returns. Those error-free, paper returns will likely be processed by the end of this year, the person said.
That is in part because the IRS planned a massive hiring spree during the tax season in order to wade through unprocessed returns from previous years. The agency said Tuesday that it has hired 1,5000 new employees as part of a broader plan to onboard about 10,000 workers in the next year. On top of that, workers who process original returns have recorded about a half million hours of overtime this year, while some 2,000 employees shifted from other parts of the agency to focus on processing returns.
"Business returns filed in 2021 will be completed shortly thereafter, and the IRS will continue to work quickly to resolve the few remaining 2021 individual returns that have errors," IRS Commissioner Chuck Rettig said in a statement.
The agency kicked off the tax-filing season with roughly 8 million unprocessed returns from 2021; by comparison, the IRS usually enters the tax-filing season with fewer than 1 million remaining items to address.
The heap of unprocessed returns stemmed from pandemic-related disruptions, including a worker shortage, the Herculean task of administering millions of stimulus checks and adapting to other tax changes in the different COVID-19 relief packages, like boosted child tax credit payments.
Rettig has previously noted that the agency is grossly understaffed; before the hiring spree, it had 20,000 fewer staff than it did in 2010, and its budget is roughly $11.4 billion – 20% less than it was in 2010, when adjusted for inflation, according to the Congressional Budget Office.
The IRS has laid out a goal to reach "healthy" levels of inventory by the end of 2022.