Caution: 2022 Tax Season — Bumpy Road Ahead

U.S. taxpayers, prepare for another bumpy tax season as the IRS digs itself out from under a mountain of unprocessed returns.

January 24, 2022. This seemingly random date at the end of January marks the beginning of tax season for U.S. taxpayers. While our annual appointment with the IRS is rarely welcomed, the 2021/2022 tax season is slated to be even more problematic due to an estimated backlog of 10 million unprocessed returns.

As 2020's backlog spills into 2021 and 2022, millions of Americans are still awaiting their refund. Covid-19 continues to impact ongoing staff shortages, along with a large number of new tax code considerations, like the American Rescue Plan (ARP) Act, Child Tax Credits (CTC), Paycheck Protection Program (PPP) to name just a few. The IRS has a lot on its plate.

Amended Tax Returns on Hold Until Backlog is Cleared

Among this massive backlog, it’s estimated there are nearly three million unprocessed amended returns, and the IRS's Taxpayer Advocate Service (TAS) has stopped accepting any amended returns until the agency can work through its voluminous backlog.

U.S. State Representatives Katie Porter and Gerald E. Connolly sent a letter to IRS Commissioner Charles P. Rettig, urging him to clear the massive backlog of tax returns, with a particular focus on low-income taxpayers, who "without their refunds, face eviction, food insecurity, or an inability to afford needed medications or treatments."

Porter and Connolly requested a member-level briefing with Rettig on the agency’s plan for clearing the backlog, and expediting the tax returns of vulnerable individuals, families, and small businesses, by January 31, 2021.

Vintage Equipment Continues to be Problematic

The wait times are real – and about to get worse – as IRS workers continue to face pandemic-related disruptions and policymakers scramble to address the needs of their constituents — while tax codes remain in flux.

Aside from the pandemic, the agency has faced endemic underfunding, and ongoing changes to tax codes. But perhaps the biggest culprit in this massive backlog is the agency’s antiquated computer system.

All tax returns submitted to the IRS are processed, stored, and managed, on computer systems in their sixth decade of service. Should this archaic system fail, the consequences could be dire for the economy.

Not only is the computer technology older than the first lunar landing, but the phone systems are also just as outdated. In 2021 the National Taxpayer Advocate (NTA) estimated that just over 10% of calls are answered.

In a column published last July, Washington Post writer Michelle Singletary called the agency's phone system a "hot mess" during her attempt to resolve her own tax issues.

Seven Changes to Be Aware of

Here are the seven big tax changes you need to be aware of:

• Individuals will no longer be taxed on forgiven student loan debt
• Higher deductions for out-of-pocket medical expenses
• Increased Child Tax Credit
• Increased standard deductions
• Revised income brackets
• Required minimum distributions for 401(k)s are back
• $300 deduction for charity, on non-itemized returns

How to Ensure Your Tax Returns Makes it Through Automation

Ensure your tax return doesn’t get sent back for a manual review by carefully reviewing all your documents and ensure they are correct, consistent, and truthful — to the letter.

For instance, if your W-2 says you earned $60K, but you only claim $58K, your return gets flagged for manual processing.

If last year’s return shows your address as a “Street” instead of “St.” or vice versa, it may get flagged.

Here’s where a qualified tax accountant or reputable bookkeeping service can help save you time and energy. The IRS’s automation system will reject returns for even minor discrepancies.

Check your numbers thrice. And remember, all manual processing of amended tax returns has been halted until the backlog is cleared. You may be waiting another year (or more) to get yours. Then, file electronically — as early as possible.

Lastly, make sure to open and read all documents received from the IRS. Expect these missives to contain necessary information for clearing or processing your return, and other information germane to your circumstances.

Get Your Taxes in Shape with Good Bookkeeping

If you're new to business, and this is your first tax season, now's a good time to align with a reputable bookkeeping service. We've partnered with Bench and QuickBooks to get your books and taxes in top shape for the season.

• Bench. America's largest bookkeeping service for small businesses, you'll work with real people, who keep perfect books, so you can do what you're best at (if it's not accounting).
• QuickBooks. Well known accounting software that keeps things simple — and sorted. Pick the subscription level that suits your needs. Plans range from $12.50 — to $90 for the Simple, Essentials, and Advanced tools to help your business thrive.

How Else Can Skip Help? Whether you need assistance navigating funding for your small business — like SBA loans, grants, or other financing options, or guidance with government-related services — like TSA PreCheck or DMV appointments, we’re ready to help. Become a member and skip the red tape.