WASHINGTON, D.C. — For the first time in years, good news is coming from the IRS about taxpayer services. According to National Taxpayer Advocate Erin M. Collins’ 2024 Annual Report to Congress, noticeable progress has been made in improving taxpayer experiences—but significant challenges remain in critical areas like processing Employee Retention Credit (ERC) claims and resolving identity theft cases.
“For the first time since I became the National Taxpayer Advocate in 2020, I can begin this report with good news,” Collins states. Better service, quicker refunds, and shorter wait times marked substantial gains for taxpayers during 2024, but ongoing systemic issues highlight the need for immediate reform.
A Step in the Right Direction
The report praised the IRS for making strides in customer service and technology modernization. Thanks to multi-year funding from the Inflation Reduction Act (IRA), the IRS has answered millions more calls and drastically reduced its response times for taxpayer correspondence. For instance, the average response time to individual correspondence fell from seven months to about 3½ months, offering faster relief to individuals seeking refunds or resolving disputes.
Other innovations include enhanced online tools, voicebots, and chatbots, as well as the ability for taxpayers to submit 30 common tax forms via mobile devices. These changes are nothing short of transformational, especially for the 15% of Americans who rely solely on their smartphones for internet access.
Collins noted the significance of this funding, stating that sufficient support for taxpayer services and IT modernization could exponentially improve the tax system. However, she warned that recent political discussions about cutting enforcement funding should not threaten these critical investments, writing, “Congress should not inadvertently throw out the baby with the bathwater.”
Pressing Challenges
Despite the marked improvements, ongoing obstacles in two major areas are causing significant frustration for taxpayers.
ERC Backlogs
The Employee Retention Credit (ERC), a federal program designed to help businesses weather the pandemic by providing refundable tax credits, remains riddled with delays. By the end of October 2024, the IRS faced a backlog of 1.2 million ERC claims, many pending for more than a year. Businesses awaiting these funds struggle to stay afloat, with no clear way to track claim progress due to a lack of transparency in the process.
Even more troubling, disallowance letters lack critical details, and audit-like procedures are being implemented without standard protections, leaving businesses in limbo for months or even years. While the IRS has committed to processing 500,000 more claims in 2025, it’s unclear when businesses will see refunds.
Identity Theft Cases
Equally concerning are delays in resolving identity theft cases. For nearly half a million taxpayers affected in Fiscal Year 2024, the average resolution time stretched to almost two years—longer than 2023’s delays. It’s a crushing ordeal for victims, who often wait far too long for their rightful refunds.
Collins called these delays “unconscionable,” urging the IRS to focus resources on these cases and halve resolution times to 90 days or less. For taxpayers who’ve been targeted, such changes could mean the difference between stability and financial ruin.
Broader Implications
These persistent issues don’t just impact taxpayers—they reverberate through the economy. Take ERC delays, for example. Business owners reliant on these funds struggle to cover payroll, pay suppliers, or invest in growth, leaving a ripple effect across local economies. Likewise, delays in resolving identity theft cases erode trust in the system, leaving victims feeling unsupported and vulnerable.
On the other hand, improvements in customer service and technology modernization reflect the potential for a brighter future. With expanded in-person hours, mobile filing options, and more reliable online tools, the IRS is creating a more equitable system for taxpayers of all income levels. It’s a move toward fairness that ensures everyone—regardless of whether they have internet access, technological literacy, or extra time—can meet their obligations with dignity.
A Call for Reform and Funding Stability
The report didn’t shy away from calling on Congress to make critical legislative changes. Among the top recommendations, Collins urged lawmakers to:
- Reallocate funding from enforcement to taxpayer services to ensure adequate support for improving services and technology.
- Dramatically reduce the backlog in criminal identity theft cases by prioritizing these victims.
- Expand U.S. Tax Court jurisdiction to make the appeals process more accessible for taxpayers.
Such reforms aren’t just technical fixes—they’re steps toward restoring public trust in the tax system. With more than 10 million paper returns still processed manually every year and decades-long challenges in employee hiring and retention, the IRS faces an uphill battle to transform itself into the “world-class” agency Collins envisions. But progress in 2024 shows that change is possible, with the right investments and reforms.
Looking Ahead
The IRS is at a crossroads. Recent gains in taxpayer services demonstrate what’s achievable when resources are properly aligned with public needs, but without sustained funding and targeted reforms, old inefficiencies risk reemerging.
Collins summed it up best, saying, “With sufficient funding for Taxpayer Services and [Business Systems Modernization], I believe the IRS can… produce a tax system that respects taxpayer rights, is world-class, and makes compliance easier.” The path forward is clear—it’s up to Congress and the IRS to ensure the agency continues delivering on this promise.
Taxpayers and businesses alike deserve a system that serves them fairly, efficiently, and transparently. 2024’s improvements represent a foundation to build on—a glimpse of what’s possible when policy aligns with the values of fairness and justice.
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