An enormous backlog of tax returns has caused the IRS to delay refunds for millions.It did not give a time frame for the processing of 35 million returns that are still unprocessed.In the last decade, the IRS budget has been reduced which has led to backlogs in enforcement and lower enforcement.Check out more stories from Insider's business page.According to a new government watchdog report, the Internal Revenue Service has a huge backlog of 35,000,000 unprocessed tax returns. This will force millions of taxpayers, both individual and corporate, to wait for potentially crucial federal refunds.The Wednesday report by Erin Collins, National Taxpayer Advocate, an independent organization within IRS, highlights the major challenges facing the cash-strapped IRS. Collins played a key role in providing economic relief for individuals and businesses during the pandemic.Current backlog includes 17,000,000 paper tax returns still not processed, and 16 million additional returns that need to be reviewed. Another 2.7 million amended returns are still unprocessed. The backlog was four times larger than in 2019.The report did not give a time frame for when refunds could be made. The significant strain many will likely face, especially those at the lower income end, was acknowledged by the watchdog.The report stated that "for taxpayers who have the financial means to wait, it is best to be patient and allow the IRS to clear its backlog." Refund delays can cause significant financial hardships, especially for taxpayers with low incomes or small businesses that operate on the margin.This report comes at a time when the IRS is tasked with new pandemic-era obligations to distribute money to affected Americans and their families. During the pandemic, it was responsible for distributing stimulus checks to millions of Americans. It now has the responsibility of distributing child tax credit payments to eligible families. Insider reported that the IRS portal to help the poorest families receive these benefits is set to abandon the very people it was intended to serve.John Koskinen, former IRS Commissioner, told Jeff Stein of The Washington Post that the problem isn't with IRS employees who work hard. The problem is with Congress Republicans who refuse to fund adequate funding for ten years.The 2020 House Committee Budget report found that the agency's budget was down 20% between 2010 and 2018. The White House has called for more funding to the agency after the enforcement of the richest Americans dropped, leaving potentially billions uncollected.The budget cuts may have a double impact on low-income Americans. ProPublica has previously shown that Americans with lower incomes are audited at the exact same rate as those with the highest incomes. This is because it is easier and more efficient for them to audit their tax returns than the complex ones of America's richest.
