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The IRS has ended the filing season with a backlog of over 35 million individual and business income tax returns that require manual processing, after facing an “unprecedented” number of returns requiring manual review, according to the National Taxpayer Advocate.

The “historically high” number of returns requiring manual review means that most individual taxpayers and many business taxpayers will not receive timely refunds and will have to wait until the IRS eventually processes their returns.

The backlog includes about 16.8 million paper tax returns waiting to be processed, about 15.8 million returns suspended during processing that require further review and about 2.7 million amended returns awaiting processing. 

Of the 15.8 million returns suspended, approximately 10.3 million were in suspense in the Error Resolution System (ERS) unit as of May 22, 2021. Once the IRS identifies a return as having a potential error, it sends it to ERS, where an employee must manually review it to address the identified error(s). 

According to the National Taxpayer Advocate, during a typical filing season, ERS can quickly determine if an error was made and move the return through the process, but this filing season was “anything but typical”, however, leading to long delays in processing. 

The report said: “This past year and the 2021 filing season conjure up every possible cliché for taxpayers, tax professionals, the IRS, and its employees — it was a perfect storm; it was the best of times and the worst of times; patience is a virtue; with experience comes wisdom and with wisdom comes experience; out of the ashes we rise; and we experienced historical highs and lows.” 

It added that “patience is a virtue”, and noted that for taxpayers who can “afford to wait, the best advice is to be patient and give the IRS time to work through its processing backlog”.

It said: “But particularly for low-income taxpayers and small businesses operating on the margin, refund delays can impose significant financial hardships. Not everyone can afford to be patient.” 

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