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NEWSLETTERS
Where’s My Refund?
IRS seeks upgrade to dreaded online tool, but don’t hold your breath
In the midst of a particularly horrific tax season, with the beleaguered Internal Revenue Service (IRS) swamped by backlogged returns and citizens waiting anxiously for missing refunds to appear, many taxpayers seeking clarity have been referred to the dreaded online “Where’s My Refund” tracker. In other words, the place where inquiries go to die.
The “Where’s My Refund” tool, which lives on the IRS website, has been of scant help to many visitors, informing taxpayers with late refunds only that their returns are “pending.” It does not offer any estimate of when refunds can be expected, nor does it advise if additional supporting documents are needed. The lack of such basic services was flagged by the Taxpayer Advocate Service (TAS)—the arm of the IRS that ensures fair treatment of citizen taxpayers—which recommended that the IRS supply these features as quickly as possible.
And according to a TAS report, the IRS seems to have taken the first steps. It has submitted several “Unified Work Requests” to its engineers, requesting programming upgrades to the tool that would include more specific reasons for why a refund has been delayed, or a notice if it’s still reviewing whether supporting documents are needed. It also says it’s exploring a system by which taxpayers can digitally transmit documents to the IRS, such as uploading through the IRS.gov website. That could include a permanent extension of the interim rules, allowing people to submit identity verification files over eFax during the COVID-19 pandemic.
But it’s not a done deal by any means: The IRS cautions that such programming upgrades are “subject to funding limitations and competing priorities,” meaning all this could very well amount to nothing if cash is thin or other issues are deemed more important. It’s also worth noting that another request—to supply relevant contact telephone numbers through the “Where’s My Refund” tool—has already been denied “due to funding limitations.” So if you’re still waiting for your 2020 refund, maybe don’t hold your breath.
Further along in the report, the IRS also notes it would not be able to expedite legitimate refunds by modernizing its “obsolete” systems—also “due to funding limitations”—nor would it be sharing data about how long it detains legitimate refunds that are tagged by fraud filters.
IRS Highlights New Business Tax Account Features, FS-2024-27 The IRS announced that it is continuing to expand the features within Business Tax Account (BTA), an online self-service tool for business taxpayers that now allows them to view and make balance-due p...
FL - Correction: interest rates for second half of 2024 announced The floating interest rate applicable to taxes administered by the Florida Department of Revenue on underpayments (deficiencies) and late payments for July 1, 2024, through December 31, 2024, remains ...
GA - Taxpayers appeal dismissed for lack of jurisdiction For Georgia property tax purposes, the Court of Appeals dismissed the taxpayers' appeal for lack of jurisdiction. In this case, the taxpayers filed a notice of appeal seeking to appeal from the trial ...
RI - Dealers issued notice regarding cigarette tax increase The Rhode Island Division of Taxation has issued a notice to cigarette dealers regarding an increase in the cigarette tax. The new rate of 225 mills per cigarette increases the tax from $4.25 per pack...
VT - Updated cannabis tax guide issued Vermont provides updated guidance regarding the sales and use and excise taxes imposed on cannabis. Vermont Cannabis Tax Guide, Vermont Department of Taxes, August 2024...
The agency's overall backlog is growing and its processing time is slowing.
While the Internal Revenue Service has made significant progress in slashing the backlog of tax returns from 2021, it is now processing the filings at a slower clip and taxpayers are facing unprecedented months of delays before receiving their refunds.
IRS boasted this week that it has made major strides to dig out from the mountain of unprocessed cases, but National Taxpayer Advocate Erin Collins said in a new report issued Wednesday things have not actually improved. Despite all of the agency’s efforts, the backlog has actually grown since the same period last year and IRS remains unlikely to meet its year-end goals.
“Taxpayers are still experiencing unprecedented delays in receiving their refunds,” Collins wrote. “Taxpayers continue to face unprecedented challenges in reaching the IRS by phone. And the IRS’s unprecedented delays in processing correspondence are contributing to additional refund delays and taxpayer frustrations.”
Collins noted that IRS was processing 242,000 individual paper income tax returns per week in April, but that had declined by 15% in May. The agency would have to process 500,000 forms per week to eliminate the backlog this year. She added it was “deeply concerning” that IRS ended May with a bigger backlog of paper tax returns than it had one year prior.
“The math is daunting,” Collins said. She added she was pleased IRS leadership committed to reducing the backlog to a “healthy” level by the end of the year, but said it “will be a difficult commitment to achieve.” Additionally, she stressed that IRS is now taking six months to distribute refunds to paper-filing taxpayers and implored IRS management to get that down to the normal four-to-six week period before it considers any backlog “healthy.”
Despite the ongoing problems, IRS announced it would complete the processing of individual tax returns without issues from 2021 this week. It will complete business returns filed in 2021 shortly thereafter. As of April, there were still 6 million returns outstanding. The agency has taken several steps to address the backlog, including mandating overtime for 6,000 employees and allowing for voluntary overtime for an additional 10,000 workers, deploying surge teams, bringing on contractors and going on a hiring spree aided by a hastened onboarding process authorized by Congress.
"IRS employees have been working tirelessly to process these tax returns as quickly as possible and help people who are waiting on refunds or resolution of an account issue," IRS Commissioner Chuck Rettig said. "Completing the individual returns filed last year with no errors is a major milestone, but there is still work to do.”
The taxpayer advocate did note that things have mostly gone smoothly for e-filers, or about 85% of taxpayers. By late May, IRS had received 145 million returns and processed refunds for 66% of them. Overall, however, the backlog has actually grown since the end of May 2021. It is now at 21.3 million, compared to 20 million last year. IRS noted much of this year’s backlog consists of original returns, which can be processed more quickly than amended returns.
Earlier this year, Rettig announced a plan to hire 10,000 new employees by the end of 2023. He told Congress in April the agency was halfway to its goal for 2022. Collins, however, noted IRS had hoped to hire around 5,500 processing employees this year and as of May was more than 3,400 workers short of that goal. It has found more success in hiring for accounts management—workers who handle taxpayer interactions, including by answering calls—hiring 99% of its goal of 5,000 employees.
Still, the agency has struggled immensely to keep pace with demand for service. The number of calls IRS received dropped by more than half this year, but it only grew its answer rate from 9% in 2021 to 10% in 2022. Individuals waited on hold for an average of 29 minutes, up from 20 minutes last year. The agency failed to improve its answer rate as it shifted employees in Accounts Management away from the phones and toward processing correspondence.
“We remain focused on doing everything possible to expedite processing of these tax returns, and we continue to add more people to this effort as our hiring efforts continue this summer," Rettig said.
Collins said IRS should have acted more quickly to reassign employees to processing functions, which would have reduced the existing backlog and allowed the agency to address this year’s returns more quickly. She also faulted IRS for dragging its feet in installing new technology to read paper returns more quickly.
The taxpayer advocate said she would push IRS management over the next year to automate paper returns processing, reduce barriers to e-filing, improve hiring and training and improve telephone service. Congress provided IRS with a funding boost of $675 million as part of the fiscal 2022 omnibus spending bill, a 6% increase and the largest bump since 2001. President Biden requested an additional 18% bump for fiscal 2023, and has sought an $80 billion surge over 10 years as part of his larger social and climate spending package.
The IRS has announced a second Voluntary Disclosure Program for employers to resolve erroneous claims for credit or refund involving the COVID-19 Employee Retention Credit (ERC). Participation in the second ERC Voluntary Disclosure Program is limited to ERC claims filed for the 2021 tax period(s), and cannot be used to disclose and repay ERC money from tax periods in 2020.
The IRS has announced a second Voluntary Disclosure Program for employers to resolve erroneous claims for credit or refund involving the COVID-19 Employee Retention Credit (ERC). Participation in the second ERC Voluntary Disclosure Program is limited to ERC claims filed for the 2021 tax period(s), and cannot be used to disclose and repay ERC money from tax periods in 2020.
The program is designed to help businesses with questionable claims to self-correct and repay the credits they received after filing erroneous ERC claims, many of which were driven by aggressive marketing from unscrupulous promoters.
The first ERC Voluntary Disclosure Program was announced in late December 2023, and ended on March 22, 2024 (Announcement 2024-3, I.R.B. 2024-2, 364). Over 2,600 taxpayers applied to the first program to resolve their improper ERC claims and avoid civil penalties and unnecessary litigation.
The second ERC Voluntary Disclosure Program will allow businesses to correct improper payments at a 15-percent discount, and avoid future audits, penalties and interest.
Procedures for Second Voluntary Disclosure Program
To apply, employers must file Form 15434, Application for Employee Retention Credit Voluntary Disclosure Program, and submit it through the IRS Document Upload Tool. Employers must provide the IRS with the names, addresses, telephone numbers and details about the services provided by any advisors or tax preparers who advised or assisted them with their claims, and are expected to repay their full ERC claimed, minus the 15-percent reduction allowed through the Voluntary Disclosure Program.
Eligible employers must apply by 11:59 pm local time on November 22, 2024.
The Department of the Treasury and the IRS released statistics on the Inflation Reduction Act clean energy tax credits for the 2023 tax year. Taxpayers have claimed over $6 billion in tax credits for residential clean energy investments and more than $2 billion for energy-efficient home improvements on 2023 tax returns filed and processed through May 23, 2024.
The Department of the Treasury and the IRS releasedstatistics on the Inflation Reduction Act clean energy tax creditsfor the 2023 tax year. Taxpayers have claimed over $6 billion intax creditsfor residential clean energy investments and more than $2 billion for energy-efficient home improvements on 2023 tax returns filed and processed through May 23, 2024.
For the Residential Clean Energy Credit, 1,246,440 returns were filed, with a total credit value of $6.3 billion and an average of $5,084 per return. Specific investments include:
Rooftop solar: 752,300 returns, up to 30 percent of the cost;
Batteries: 48,840 returns, up to 30 percent of the cost.
For the Energy Efficient Home Improvement Credit, 2,338,430 returns were filed, with a total credit value of $2.1 billion and an average of $882 per return. Specific improvements include:
Home insulation: 669,440 returns, up to 30 percent of the cost;
Windows and skylights: 694,450 returns, up to 30 percent of the cost or $600;
Central air conditioners: 488,050 returns, up to 30 percent of the cost or $600;
Doors: 400,070 returns, up to 30 percent of the cost, $250 per door or $500 total;
Heat pumps: 267,780 returns, up to 30 percent of the cost or $2,000;
Heat pump water heaters: 104,180 returns, up to 30 percent of the cost or $2,000.
Internal Revenue Service Commissioner Daniel Werfel is calling on Congress to maintain the agency’s funding and not make any further cuts to the supplemental funding provided to the agency in the Inflation Reduction Act, using recent successes in customer service and compliance to validate his request.
Internal Revenue Service Commissioner Daniel Werfel is calling on Congress to maintain the agency’s funding and not make any further cuts to the supplemental funding provided to the agency in the Inflation Reduction Act, using recent successes in customer service and compliance to validate his request.
"The Inflation Reduction Act funding is making a difference for taxpayers, and we will build on these improvements in the months ahead,"Werfel said during a July 24, 2024, press teleconference, adding that"for this progress to continue, we must maintain a reliable, consistent annual appropriations for the agency as well as keeping the Inflation Reduction Act funding intact."
During the call, Werfel highlighted a number of improvements to IRS operations that have come about due to the IRA funding, including expansion of online account features (such as providing more digital forms, making it easier to make online payments, and making access in general easier); providing more access to taxpayers wanting face-to-face assistance (including a 37 percent increase in interactions at taxpayer assistance centers); IT modernization; and the collection of more than $1 billion in taxes due form high wealth individuals.
Werfel did highlight an area where he would like to see some improvements, including the number of taxpayers who have activated their online account.
While he did not have a number of how many taxpayers have activated their accounts so far, he said that “"we are nowhere near where we have the opportunity to be,"” adding that as functionality improves and expands, that will bring more taxpayers in to use their online accounts and other digital services.
He also noted that online accounts will be a deterrent for scams, and it will provide taxpayers with the information they need to not be fooled by scammers.
“We see the online account as a real way to test these scams and schemes because taxpayers will have a single source of truth about whether they actually owe a debt, whether the IRS is trying to reach them, and also information we can push out to taxpayers more regularly if they sign up and opt in for it on the latest scams and schemes,” Werfel said.
The IRS has intensified its efforts to scrutinize claims for the Employee Retention Credit (ERC), issuing five new warning signs of incorrect claims. These warning signs, based on common issues observed by IRS compliance teams, are in addition to seven problem areas previously highlighted by the agency. Businesses with pending or previously approved claims are urged to carefully review their filings to confirm eligibility and ensure credits claimed do not include any of these twelve warning signs or other mistakes. The IRS emphasizes the importance of consulting a trusted tax professional rather than promoters to ensure compliance with ERC rules.
The IRS has intensified its efforts to scrutinize claims for the Employee Retention Credit (ERC), issuing five new warning signs of incorrect claims. These warning signs, based on common issues observed by IRS compliance teams, are in addition to seven problem areas previously highlighted by the agency. Businesses with pending or previously approved claims are urged to carefully review their filings to confirm eligibility and ensure credits claimed do not include any of these twelve warning signs or other mistakes. The IRS emphasizes the importance of consulting a trusted tax professional rather than promoters to ensure compliance with ERC rules.
The newly identified issues include essential businesses claiming ERC despite being fully operational, unsupported government order suspensions, misreporting wages paid to family members, using wages already forgiven under the Paycheck Protection Program, and large employers incorrectly claiming wages for employees who provided services. The IRS plans todeny tens of thousands of claimsthat show clear signs of being erroneous and scrutinize hundreds of thousands more that may be incorrect. In addition, the IRS announced upcoming compliance measures and details about reopening the Voluntary Disclosure Program, aimed at addressing high-risk ERC claims and processing low-risk payments to help small businesses with legitimate claims.
IRS Commissioner Danny Werfel emphasized the agency’s commitment to pursuing improper claims and increasing payments to businesses with legitimate claims. Promoters lured many businesses into mistakenly claiming the ERC, leading to the IRS digitizing and analyzing approximately 1 million ERC claims, representing over $86 billion. The IRS urges businesses to act promptly to resolve incorrect claims, avoiding future issues such as audits, repayment, penalties, and interest. Taxpayers should recheck their claims with the help oftrusted tax professionals, considering options such as theERC Withdrawal Programoramending their returnsto correct overclaimed amounts.
The IRS, in collaboration with state tax agencies and the national tax industry, has initiated a new effort to tackle the rising threat of tax-related scams. This initiative, named the Coalition Against Scam and Scheme Threats (CASST), was launched in response to a significant increase in fraudulent activities during the most recent tax filing season. These scams have targeted both individual taxpayers and government systems, seeking to exploit vulnerabilities for financial gain.
The IRS, in collaboration with state tax agencies and the national tax industry, has initiated a new effort to tackle the rising threat of tax-related scams. This initiative, named theCoalition Against Scam and Scheme Threats (CASST), was launched in response to a significant increase in fraudulent activities during the most recent tax filing season. These scams have targeted both individual taxpayers and government systems, seeking to exploit vulnerabilities for financial gain.
CASST will focus on three primary objectives: enhancing public outreach and education to alert taxpayers to emerging threats, developing new methods to identify fraudulent returns at the point of filing, and improving the infrastructure to protect taxpayers and the integrity of the tax system. This initiative builds on the successful framework of the Security Summit, which was launched in 2015 to combat tax-related identity theft. While the Security Summit made significant progress in reducing identity theft, CASST aims to address a broader range of scams, reflecting the evolving tactics of fraudsters.
The coalition has received widespread support, with over 60 private sector groups, including leading software and financial companies, joining the effort. Key national tax professional organizations are also participating, all committed to strengthening the security of the tax system.
Among the measures CASST will implement are enhanced validation processes for tax preparers, including improvements to the Electronic Filing Identification Number (EFIN) and Preparer Tax Identification Number (PTIN) systems. The coalition will also target the issue ofghost preparers, who prepare tax returns for a fee without proper disclosure, leading to inflated refunds and significant revenue losses.
In addition to these technical improvements, CASST will address specific scams, such as fraudulent claims for tax credits like theFuel Tax Credit. By the 2025 filing season, CASST aims to have new protections in place, bolstering defenses across both public and private sectors to make it more difficult for scammers to exploit the tax system. This coordinated effort seeks to protect taxpayers and ensure the integrity of the nation’s tax system.
The Internal Revenue Service will be processing about 50,000 "low-risk" Employee Retention Creditclaims, and it will be shifting the moratorium dates on processing.
The Internal Revenue Service will be processing about 50,000"low-risk"Employee Retention Creditclaims, and it will be shifting the moratorium dates on processing.
"The IRS projects payments will begin in September with additional payments going out in subsequent weeks,"the agency said in an August 8, 2024, statement."The IRS anticipates adding another large block of additional low-risk claims for processing and payment in the fall."
The agency also announced that it is shifting the moratorium period on processing new claims. Originally, the agency was not processing claims that were filed after September 14, 2023. It is now going to process claims filed between September 14, 2023, and January 31, 2024.
"Like the rest of the ERC inventory, work will focus on the highest and lowest risk claims at the top and bottom end of the spectrum,"the IRS said."This means there will be instances where the agency will start taking actions on claims submitted in this time period when the agency has seen a sound basis to pay or deny any refund claim."
The agency also said it has sent out"28,000 disallowance letters to businesses whose claims showed a high risk of being incorrect,"preventing up to $5 billion in improper payments. It also has"thousands of audits underway, and 460 criminal cases have been initiated"with potentially fraudulent claims worth nearly $7 billion. Thirty-seven investigations have resulted in federal charges, with 17 resulting in convictions.
Businesses that receive a denial letter will have the ability toappealthe decision.
The agency also offered some other updates on the ERC program, including:
The claimwithdrawalprocess for unprocessed ERC has led to more than 7,300 withdrawing $677 million in claims;
The voluntary disclosure program received more than 2,600 applications from ERC recipients that disclosed $1.09 billion in credits; and
The IRS Office of Promoter Investigations has received"hundreds"of referrals about suspected abusive tax promoters and preparers improperly promoting the ability to claim the ERC.
"The IRS is committed to continuing out work to resolve this program as Congress contemplates further action, both for the good of legitimate businesses and tax administration,"IRS Commissioner Daniel Werfel said in the statement.
The IRS has announced substantial progress in its ongoing efforts to modernize tax administration, emphasizing a shift towards digital interactions and enhanced measures to combat tax evasion. This update, part of a broader 10-year plan supported by the Inflation Reduction Act, reflects the agency's commitment to improving taxpayer services and ensuring fairer compliance.
The IRS has announced substantial progress in its ongoing efforts to modernize tax administration, emphasizing a shift towards digital interactions and enhanced measures to combat tax evasion. This update, part of a broader 10-year plan supported by the Inflation Reduction Act, reflects the agency's commitment to improving taxpayer services and ensuring fairer compliance.
The IRS’s push for digital transformation has seen significant advancements, allowing taxpayers to conduct nearly all interactions with the agency online. This initiative aims to reduce the reliance on paper submissions, expedite tax processing, and improve overall efficiency. In 2024 alone, the IRS introduced extended hours at Taxpayer Assistance Centers across the country, particularly benefiting rural and underserved communities. The agency also reported a notable increase in face-to-face interactions, with a 37 percent rise in contacts during the 2024 filing season.
In parallel with these service improvements, the IRS has ramped up efforts to disrupt complex tax evasion schemes. Leveraging advanced data science and technology, the agency has focused on high-income individuals and entities employing sophisticated financial maneuvers to avoid taxes. Among the IRS’s new measures is a moratorium on processing Employee Retention Credit claims to prevent fraud, alongside initiatives targeting abusive use of partnerships and improper corporate practices.
The IRS also highlighted its progress in eliminating paper filings through the introduction of the Document Upload Tool, which allows taxpayers to submit documents electronically. This tool, along with upgraded scanning and mail-sorting equipment, is expected to significantly reduce the volume of paper correspondence, potentially replacing millions of paper documents each year. These technological upgrades are part of the IRS’s broader goal to create a fully digital workflow, thereby speeding up refunds and improving service accuracy.
Additionally, the IRS has launched new programs to ensure taxpayers are informed about and can claim eligible credits and deductions. This includes outreach efforts related to the Child Tax Credit and the Earned Income Tax Credit, aiming to bridge the gap for eligible taxpayers who may not have claimed these benefits. These initiatives underline the IRS's dedication to a more equitable tax system, ensuring that all taxpayers have access to the credits and services they are entitled to while maintaining robust compliance standards.
