The 2024 Annual Report to Congress by National Taxpayer Advocate Erin Collins is a mixed evaluation of the IRS. It praises the agency's significant progress in taxpayer services but spotlights ongoing issues such as delays in processing Employer Retention Credit (ERC) claims and identity theft resolution cases.
Released on Jan. 8, the report highlights the agency’s strides in modernization and efficiency, made possible by multiyear funding from the Inflation Reduction Act (IRA), alongside areas still in need of improvement, such as delays in processing Employee Retention Credit (ERC) claims and identity theft resolution cases.
CPA Practice Advisor reported that Collins commended the IRS for enhanced taxpayer services, which have benefited from expanded funding. The IRS hired additional customer service representatives, answered millions more calls and cut average response times for correspondence by half, from seven months to three and a half months. The agency also increased in-person assistance by offering evening and weekend hours at its Taxpayer Assistance Centers.
Technology upgrades have further modernized IRS processes, enabling taxpayers to use online accounts, voice bots and chatbots to address issues, submit forms electronically and communicate securely about pending cases. These improvements have particularly benefited underserved populations, including the 15% of Americans who rely solely on smartphones for Internet access.
Despite these advancements, the report raised concerns about the impact of recent funding reductions. Initially, the IRA allocated $79 billion over ten years for IRS modernization. However, legislative agreements reduced this funding by over $20 billion, creating uncertainty for future initiatives. Accounting Today reported. Collins urged lawmakers to avoid further cuts, warning that they could undermine progress in improving taxpayer services and technology.
The report also identifies persistent challenges in processing ERC claims, with a backlog of approximately 1.2 million claims, many pending for over a year. The ERC, a refundable tax credit introduced during the COVID-19 pandemic, was designed to help businesses retain employees. However, fraud concerns led the IRS to pause processing in September 2023, exacerbating delays.
Collins acknowledged the need for fraud prevention but stressed the financial hardships faced by eligible businesses awaiting funds. Many have been forced to close, take out loans or delay payroll, while the IRS struggles to balance fraud detection with timely claim process an additional 500,000 claims in 2025, though the timeline for completing these reviews remains unclear.
Another critical issue raised in the report is the lengthy delays in resolving identity theft cases. For fiscal year 2024, the average resolution time was nearly two years, impacting nearly half a million taxpayers. These delays, described by Collins as “unconscionable,” prevent victims from accessing refunds and recovering from financial disruptions. The report called on the IRS to prioritize these cases and reduce resolution times to 90 days or less, the CPA Practice Advisor explained.
The report also included legislative recommendation to strengthen taxpayer rights and improve tax administration. Among the 69 proposals were authorizing minimum competency standards for tax preparers, expanding U.S. Tax Court jurisdiction to include refund cases, and increasing funding for Low-Income Taxpayer Clinics. Collins emphasized the need for Congress to mandate timely processing of refund claims and highlighted the importance of adequate funding to support the IRS’s mission.
As the IRS works to navigate these challenges, the report underscores the importance of balancing modernization efforts with efficient service delivery. Addressing backlogs, improving identity theft resolution and maintaining sufficient funding will be essential to building public trust and ensuring a fair and effective tax system, the CPA Practice Advisor reported.