IRS in ‘Crisis’ as 2022 Tax Season Set to Kick Off

The Internal Revenue Service “is in crisis” after its most “challenging” year ever in 2021, writes the agency’s Taxpayer Advocate Office in its annual report to Congress, noting that the agency is processing more returns than ever while relying on software that is six decades old.

The IRS is scheduled to start accepting returns on Monday, kicking off income tax return season for the accounts receivable management industry. Traditionally, the weeks leading up to April 15 (April 18 for most this year, April 19 for some) are some of the busiest of the year for collection agencies, thanks to individuals using their income tax refunds to pay down old debts.

But this year is shaping up to be a lot different. For one, refunds are not expected to be as robust as in years past, largely due to many Americans already receiving their child tax credits as part of an economic stimulus package to help people through the COVID-19 pandemic.

The IRS is sitting on more than 6 million returns from last year that have not yet been processed and has seen its budget decline by 20% in the past decade, while the number of taxpayers has increased by 19%. During the 2021 fiscal year, 14,500 employees left the IRS due to retirement or separation, but only 12,500 new employees were hired.

Last year, the IRS answered one out of every nine calls it received.

“There is no way to sugarcoat the year 2021 in tax administration: From the perspective of tens of millions of taxpayers, it was horrendous,” the report states.

Here is a webinar recording on how companies in the ARM industry should be planning for the 2022 tax season:

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