2023 tax season shows IRS improvements on calls, refunds processing

From the Detroit Free Press — By Susan Tompor —

Less than three weeks to go until the April 18 tax filing deadline and, fingers crossed, things with the IRS seem to be going more smoothly than last year for many taxpayers.

Really? No joke. I know it’s hard to picture the Internal Revenue Service making any gains after some pretty brutal years. But it’s possible, based on early numbers and scattered stories, that the IRS has put its pandemic-related woes in the rearview mirror. A phone call to the IRS might get answered. And your tax refund could show up.

“It’s like night and day,” said Amber Gray-Fenner, when describing the IRS phone service lately.

Gray-Fenner, an enrolled agent at the Tax Therapy firm in Albuquerque, New Mexico, said she’s been able to get through the IRS line for tax professionals “practically immediately” for the past six weeks.

“I mean. Boom,” she said.

It’s quite a change from the long waits for the previous 18 months or so, she said, when she had to try multiple times — about 30 times was her max — to call to even get placed into the queue and then be put on hold for an IRS representative.

“When I did get in, the wait was 30 to 90 minutes, sometimes longer,” Gray-Fenner said, adding that she stopped even trying to call at some point.

One might be bold enough to believe that the tax system should be able to move along at a better pace, if you hire more workers, clean up a backlog and don’t clog up tax returns with many new, complicated but limited-time-only tax breaks.

The chaos of the last few years when millions of people waited endlessly for the IRS to pick up the phone — and yes, even waited for tax refunds — had to stop. The Internal Revenue Service reportedly was starting the 2023 tax season in much better shape than last year after hiring of more employees and working through its burdensome backlog.

Some were cautiously optimistic back in January — and now some of that optimism is proving warranted.

“The filing season is going much more smoothly this year than in the past few years,” Kenneth Drexler, senior adviser to the National Taxpayer Advocate, said on Monday.

“Except for returns flagged for review, the IRS seems to be processing paper 1040s without much delay, and it’s answering a much higher percentage of taxpayer telephone calls with shorter wait times,” Drexler said.

How are tax refunds holding up?

Average refunds are clearly smaller, as was expected. Several key but temporary stimulus related tax breaks no longer exist on the 2022 tax returns — including a substantially more generous child tax credit, the recovery rebate credit and an expanded credit involving the high cost of dependent care.

When it comes to the child tax credit, families who got up to $3,600 per child for 2021 will, if eligible, get up to $2,000 for the 2022 tax year. For a family with two or three qualifying children, the possible reduction in a tax refund could be dramatic.

The child and dependent care credit falls back to a maximum of $2,100 on the 2022 tax return instead of a substantially more generous $8,000 for 2021. If you paid for child care, for example, those who qualified based on income could have received up to $4,000 in 2021 for day care expenses for one child or up to $8,000 for expenses relating to two or more children. Income limits apply to receive the credit.

When it comes to the Earned Income Tax Credit, eligible taxpayers with no children will now get $500 on 2022 tax returns — down from roughly $1,500 in 2021.

So far this tax season, the average refund dipped below $3,000 — specifically to $2,933 — based on the latest IRS data available through March 17. That’s down 11.3% from a year ago.

We’re looking at roughly $13 billion less in federal income tax refund cash overall hitting wallets so far, meaning less money is flowing through the economy.

The total dollar amount refunded is down 7.6% through March 17, compared with the same time a year ago, but still reached nearly $158.1 billion.

Even so, the number of refunds issued is up about 4% through March 17.

Early in the game, the IRS issued substantially more refunds in February — up 25.9% through Feb. 17 — than during the same time frame a year ago.

The early spike seems to reflect fewer delays at the IRS and the fact that tax filers who were owed refunds had a much easier time completing their 2022 tax returns because they didn’t need to dig up extra paper work or address some stimulus-related tax credits.

“It does seem simpler this year as we are not contending with COVID payments of advanced child tax credit and the Economic Impact Payments or stimulus,” said Faye Ball, an enrolled agent who owns The Taxlady & Co. in Wyandotte.

“Reconciling those was a large point of contention in tax years 2020 and 2021.”

The IRS appears to be back on a better track.

“IRS has caught up in opening and processing the backlog,” said Mark Steber, chief tax officer at Jackson Hewitt Tax Service.

“The turnaround time for refunds is back to pre-COVID timing,” Steber said.

Some old returns continue to be in the “error return system” waiting for responses back from taxpayers, he said, and some current returns are ending up in that system and will be delayed.

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