In December, the Treasury Inspector General for Tax Administration (TIGA) issued a report claiming that despite IRS efforts, a backlog of tax returns and other account work is expected to continue into 2023—including the quarterly federal employment tax Form 941.
Current State of the Form 941 Backlog
According to the IRS website, the Service had 7,770,000 unprocessed Forms 941 as of December 14, 2022. The IRS has advised that e-filers who received an acknowledgment of the delay only need to take further action if they are sent a request asking for additional information. Forms 941 are being processed in the order they were received, and the IRS cautions against filing a second return.
Form 941-X also has a backlog. The total inventory of unprocessed Forms 941-X as of December 14, 2022, was approximately 347,000. The Service explains that some forms cannot be processed until the initial related Forms 941 are processed. While not all of these returns involve a COVID credit, the inventory is being handled at two sites (Cincinnati and Ogden) that have trained staff to process possible COVID-19 tax credits.
Why is the Backlog Occurring?
TIGA previously reported that at the end of 2021, a significant backlog of inventories associated with the 2021 filing season remained as a result of the backup that occurred due to the COVID-19 pandemic. TIGA further reported that substantial hiring shortfalls and a lack of employees needed to fill IRS Tax Processing Center positions have continued to hamper the Service’s efforts to address backlog inventories.
What Are the Current Plans to Address the Backlog?
On March 10, 2022, the IRS announced its plans to address the continuing backlog of tax returns and other account work during the 2022 filing season. During the 2022 season, the IRS did take several steps to address staffing needs at the Tax Processing Centers and Accounts Management function, including gaining approval for 5,000 new hires.
The IRS also set a goal to reach healthy inventory levels by the end of 2022. To do so, the IRS developed an inventory tracker in April 2022 that would help them evaluate weekly inventory levels to monitor progress toward its goal.
However, despite efforts, the backlog is expected to continue into 2023. TIGA states that although these efforts have resulted in an increase in productivity levels, its assessment of the remaining inventory indicates that the IRS will only meet some of its goals by the end of 2022.
Need more information on Form 941 and other taxes that affect you as an employer? Check out the Complete Payroll blog. We offer hundreds of articles and resources covering everything you need to manage your payroll. Let Complete Payroll help keep you informed.