The Internal Revenue Service is already doing better than last year handling tax returns, early data shows, a reversal from the last two years of backlogs.
As of Feb. 3, the agency had processed almost 16.8 million tax returns, an increase of 29.1% over the same time a year ago when it got through just under 13 million returns. Additionally, the agency is getting to a greater share of returns, processing 88% of returns it has received compared with 77% in the same period in 2022.
It also has distributed nearly 8 million tax refunds, 84.7% more than the 4.33 million refunds it had sent out at this time last year.
Though many weeks remain until the tax deadline, the early improved figures are a positive sign for taxpayers who faced years of frustrating and confusing filing seasons, burdened by the pandemic and an underfunded IRS.
“The biggest theme right now, and I use this word loosely, is a return to normal,” Eric Bronnenkant, head of tax at Betterment, told Yahoo Finance. “A lot of the other pandemic error provisions have rolled off and we’re kind of going back to the way things were beforehand. The IRS is working harder at improving the taxpayer experience right now by hiring more people to become more efficient at what they’re doing and expanding their technology.”
More taxpayers filed electronically
More than 168 million individual tax returns are expected to be filed during the 2023 tax season, with the majority of those coming in before the April 18 tax deadline. The best way to ensure your return is processed quickly is to file electronically and select direct deposit to receive your tax refund, the IRS said.
Approximately 92% of the total returns received were filed electronically this year, the IRS found.
Still, there are times when filing by paper is unavoidable. According to the National Taxpayer Advocate (NTA), the IRS still receives millions of paper tax returns each year — roughly 13 million individual returns and millions of additional business returns just last year.
Due to staffing shortages, years of underfunding, and dated technology, those paper returns were subject to months of delays with some from last year still pending entering this tax year.
“I have a client that filed a paper return and waited nearly 16 months to get a refund,” Rus Garofalo, president of Brass Taxes, told Yahoo Finance. “At one point, we thought it had been lost in the mail, but the IRS is getting to those returns eventually.”
According to Bronnenkant, if you must file by paper, make sure your tax return is complete and error free. You should also sign your return, since a return will not be considered valid without a signature.
But “if you want to avoid your return being stuck in a pile of paper," Bronnenkant said, "you should absolutely file electronically.”
Keep up with IRS notices
The IRS is also encouraging taxpayers to have all the right information, so they can file a complete and accurate return and avoid delays or notices.
Many of the delays from the previous tax year revolved around last minute pandemic-related provisions to the tax code, which surprised taxpayers who had already filed their paper or electronic returns. As a result, the IRS sent out millions of notices to taxpayers during 2022, the NTA found, including 17 million math error notices and notices requiring a written response.
“In the past couple of years, we had trouble as tax professionals just keeping up with the scope and size of changes that would happen and how quickly they would occur,” Garofalo said. “If it’s hard for us to navigate and we had a larger source of information, imagine a single taxpayer doing their taxes.”
Still, 2023 hasn’t been without hiccups for the IRS.
Just last week, the IRS issued a late notice on whether stimulus checks and tax rebates that 21 states sent out last year to millions of taxpayers were taxable on their federal returns. The determination came almost three weeks after the filing season started.
“The IRS has been getting better at communicating — even if it's just to say they’re overwhelmed, ” Garofalo added, “being able to communicate helps show clients what’s going on because speaking with them isn’t enough.”
Gabriella is a personal finance reporter at Yahoo Finance. Follow her on Twitter @__gabriellacruz.
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