A U.S. Treasury Department watchdog recently released a report showing that nearly 8 million paper-filed business tax returns were backlogged at the IRS in 2020, an eye-opening 3,230% increase compared to 2019. The backlog was a result of “unprecedented and drastic actions” taken by the IRS to protect their employees and taxpayers during the height of the pandemic. Those actions included shutting down processing centers and other offices nationwide in early April and extending the deadline to July 15.
The majority of the backlogged returns were employment tax returns, approximately 5.5 million of them were awaiting processing at the end of 2020 according to the watchdog report. Backups and delays also impacted business tax returns for partnerships, corporations, estates and gifts, fiduciaries and tax-exempt organizations.
As of July 2021 the business tax return backlog has declined significantly to just under 300,000, which IRS officials attribute to expanding telework operations, 3,500 new hires in processing operations and spreading more than two million returns between processing centers to balance the workload.