The IRS, bolstered by funding from the Inflation Reduction Act, has seen improvements in taxpayer services, but significant challenges remain, according to a new report from the National Taxpayer Advocate. The 2024 annual report highlights both progress and persistent issues, including identity theft and lingering backlogs of pandemic-era tax credits.
Despite marked improvements, the report reveals continued delays in resolving identity theft cases, now stretching to 22 months, up from 19 months in 2023. This increase is attributed to a surge in fraudulent refund claims. Similarly, the Employee Retention Credit (ERC) program, designed to aid businesses during the pandemic, faces substantial backlogs due to widespread fraud. The IRS paused claim processing in 2023, as fraud concerns mounted.
The IRS, though processing hundreds of thousands of claims recently, still faces a backlog of nearly 1.2 million claims as of October 26, 2024. Many of these claims have been pending for over a year. While IRS Commissioner Daniel Werfel acknowledges positive trends, he cites identity theft as the agency's most pressing issue, driven by an increase in online fraud schemes. The IRS is enhancing its resources and refining its procedures to address this, prioritizing the differentiation between complex and simple identity theft cases.
The report recommends several actions, including expanding the Tax Court's jurisdiction, increasing financial support for Low Income Taxpayer Clinics, and mandating timely claim processing. These measures aim to alleviate the burdens faced by taxpayers and accelerate resolution times.
Critically, the Inflation Reduction Act funding has been instrumental in improving taxpayer services, but potential cuts to enforcement funding raise concerns. Treasury Department officials are advocating for an additional $20 billion, currently tied up in legislative language. The National Taxpayer Advocate urges Congress to prioritize taxpayer services and information technology investments, highlighting the importance of preserving already achieved improvements.
