IRS poised for a better start to the tax-filing season after 'misery in 2022,' watchdog report says

The Internal Revenue Service is set to start this year’s tax-filing season on better footing than the last few years, a new report found, even as challenges from the pandemic years remain.

This year’s report from the National Taxpayer Advocate credits the IRS for making significant progress in shrinking its massive paper jam from 4.7 million unprocessed returns at the end of 2021 to 400,000 as of Dec. 23, 2022. It further noted that increased federal funding, recruitment initiatives, and new digital solutions should help to address processing and customer service shortfalls.

Still, millions of American taxpayers endured unreasonably long refund delays last year, with some still waiting, and the report predicts it will take until midyear before major improvements in service are seen.

“The bad news is that taxpayers and tax professionals experienced more misery in 2022. The good news is that since the close of the 2022 filing season, the IRS has made considerable progress in reducing the volume of unprocessed returns and correspondence," National Taxpayer Advocate Erin M. Collins said in a press statement accompanying the release of her 2022 annual report to Congress.

“We have begun to see light at the end of the tunnel," she wrote. "I am just not sure how much further we need to travel before we see sunlight.”

Yahoo Finance's request for comment from the IRS was not immediately returned.

Some returns continue to ‘sit in a pile of mail’

For many taxpayers, getting their tax refund on time is critical – especially as many households count on the extra cash to help offset the rising costs of food, housing, or childcare or mitigate an unexpected emergency.

In 2022, about two-thirds of individual taxpayers were eligible for refunds, which averaged $3,200. However, the IRS failed to pay timely refunds to millions of taxpayers for the third straight year, the report found.

“It’s been frustrating, clients think we have special access or have some contact directly with the IRS… and when the IRS is overwhelmed, I often can’t talk to anyone, either,” Rus Garofalo, president and founder of Brass Taxes, told Yahoo Finance. “You’re essentially advising people with this opaque barrier where we can’t communicate across these lines.”