IRS's Delays in Responding to Taxpayer Correspondence Take Mounting Toll

The Internal Revenue Service’s delays in processing taxpayer correspondence are lengthening, leading to delayed tax refunds and bigger interest payments from the IRS, according to a new report.

The report, from the Treasury Inspector General for Tax Administration, found inconsistent use of “over-age” correspondence lists by some managers at the IRS causes delays in processing taxpayers’ correspondence, creating a burden for taxpayers who must wait longer for assistance and, in some cases, their tax refunds. 

The IRS’s internal guidelines specify that correspondence from taxpayers is generally considered over-age if it has not been resolved within 45 days. Customer satisfaction surveys found taxpayers were dissatisfied with the length of time the IRS took to resolve their cases. The delays can result in the IRS unnecessarily paying interest to taxpayers, estimated at more than $27.6 million in fiscal year 2014. Over-aged correspondence has steadily increased from 40 percent in fiscal year 2012 to 49 percent in fiscal year 2015.

In previous reviews, TIGTA recommended the IRS should develop a consistent process to ensure that managers complete their reviews of Automated Age Listings—that is, correspondence over-age reports.

The IRS has taken some actions to improve correspondence inventory management, the report acknowledged. For example, the IRS developed and implemented a phased approach on all its office campuses during fiscal year 2014, with the objective of closing as many cases as early as possible to reduce inventory and improve the timeliness of case resolutions.

The IRS also initiated a pilot program in February of last year to develop a consistent process for monitoring over-age reports. However, despite these actions, the percentage of over-age correspondence has continued to increase, partly because some IRS managers are not following internal guidelines requiring the use of over-age reports to monitor and reduce the inventory of unanswered correspondence.

TIGTA’s analysis of eight customer service representatives’ over-age reports for three consecutive weeks found that 16 to 82 percent of their over-aged assigned cases remained unresolved. In response to previous TIGTA reports on this issue, IRS management said they would ensure managers completed these reviews and would develop a consistent process to ensure managers completed correspondence over-age report reviews. However, some managers continue to not adhere to the required use of over-age reports, contributing to the IRS’s inability to effectively reduce the inventory of unanswered correspondence.

“Delays in processing correspondence create a burden for taxpayers, who must wait to obtain assistance and, in some cases, receive refunds,” said TIGTA Inspector General J. Russell George in a statement. “For the IRS, the delays can result in the unnecessary payment of interest. In FY 2014, the IRS paid more than $27.6 million to taxpayers as a result of not timely processing or resolving correspondence cases.”

TIGTA recommended the IRS ensure that managers provide and receive annotated over-age reports from their employees on a weekly basis. The IRS agreed with TIGTA’s recommendations and plans to re-assess its procedures to develop a consistent process for dealing with over-age reports.

The IRS’s limited resources after years of budget cuts are also contributing to the delays. In response to the report, Debra Holland, commissioner of the IRS’s Wage and Investment Division, pointed to the agency’s limited resources. “The same employees who work correspondence cases also staff our toll-free telephone service lines and, during peak periods, our resources are strained to handle both of these critical workloads,” she wrote. “Factors that can contribute to inventory aging, including waiting on additional information from taxpayers, issue complexity and competing priorities, can significantly impact the ability to resolve and conclude correspondence matters within desired timeframes.”

While she emphasized that the most significant factors in inventory aging are overall workload demand and the availability of resources to address that demand, she said the IRS is committed to continually improving its responsiveness to taxpayer inquiries.

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