If you’ve stuck for hours on the IRS customer service line, you’re probably not just behind other people with tax issues.
The queues are also filled with parents confused about new pandemic benefits, people lacking stimulus checks, and sometimes even disaster relief applicants from the Federal Emergency Management Agency.
The Covid-19 pandemic magnified long-standing structural deficiencies that hamper the IRS’s ability to fulfill its core mission of collecting revenue and enforcing tax laws – problems that money alone cannot solve. It also accelerated the transformation of the Agency from simply being a tax collector to a large state distributor of social assistance assistance, stretching resources even thinner.
“Something should suffer. And now we’re seeing what it is,” said Carlos Lopez, founder of the Latino Tax Professionals Association, who recalled waiting 2 1/2 hours to talk to someone about a tax debt of almost $ 300,000 incurred by a client’s widow.
IRS Commissioner Chuck Rettig joined the agency in 2018 with decades of experience as a Beverly Hills-based tax attorney and billed himself during a Senate confirmation hearing as someone who is familiar with the difficulties taxpayers face. The next year, Congress passed a broad reform law urging the IRS to improve its customer service.
And yet the IRS is still fighting. The last three filing seasons were marked by a backlog of unprocessed returns, confusing tax code changes and many times multiple phone calls to IRS guides than the agency can handle.
Congress is well aware of the IRS’s problems. The Taxpayer First Act, a broad law on agency audits passed in the summer of 2019, required the IRS to explore reorganization and develop both a comprehensive customer service strategy and a multi-year strategic IT plan.
But when the pandemic hit in 2020, Congress quickly saw the IRS as one of the agencies to lead the federal government’s economic response. A series of pandemic emergency bills required the IRS to issue three rounds of stimulus checks, pay the child tax deduction on a monthly basis, and administer various new and expanded business tax fringe benefits.
All of these additional responsibilities piled on top of the core work that was already overwhelming at the IRS. The number of taxpayers has grown by around 19% since 2010, while the number of staff in the Agency has shrunk by around 17% over the same period, according to a January report from National Taxpayer Advocate Erin Collins.
“They’s been asked a lot in the last two years,” Collins said in an interview. “But the challenge is that some of our core functions are paying the price.”
The IRS quickly moved resources around to manage stimulus checks and expedite child tax deductions, Collins said. This focal point contributed to building up the Agency’s repayment arrears.
At the agency’s Ogden, Utah Paper Return Processing Center, each new liability imposed on the Agency directly affects the workers responsible for processing paper returns. Brett Bemenderfer, senior program manager in submission processing at the Ogden facility, said the extra work adds manual processing burdens for the employees he manages.
Prepayments of child tax deductions required, for example, taxpayers to report how much money they received from the agency on their returns. Adding this information to a paper return – which already takes a month to process under perfect circumstances – means employees have to manually enter more data into IRS systems and increases the chance that the return will be marked for the time-consuming troubleshooting process.
“We keep being asked to do more and more with less and less,” Bemenderfer said. “And with each new step in the process being added, due to late legislation or due to additional responsibilities placed on the shoulders of the Agency, each additional step implemented adds time to the time it takes to process this return, it adds additional manual processes or burdens to employees. ”
The agency saw an influx of calls due to the new pandemic relief programs and relocated its call center staff to deal with non-tax issues. Calls to the IRS increased after the enactment of the Coronavirus Relief Act in March 2021, which approved a third stimulus check, extended the child tax deduction, and retroactively made some unemployment benefits tax-free.
IRS call centers are also sometimes tasked with answering disaster relief questions addressed to FEMA, a practice that has been around for decades. IRS call center staff are trained to answer tax questions. Carrying out emergency assistance calls is outside their normal duties.
Former taxpayer attorney Nina Olson says it’s a solution under IRS control: it could simply stop answering these calls.
“The IRS does not respond to calls from taxpayer-funded taxpayers,” Olson said in an interview. “The IRS must stop answering FEMA calls and answering calls from taxpayers.”
If that was not enough, front-line customer service representatives have other responsibilities as time allows, including answering taxpayer correspondence, processing changed returns and working paper cases.
A “vicious circle” arises for these employees: As the number of calls increases, the workers can not handle the backlog; but because the backlog continues to grow, call volume is also rising, Collins said in his report.
Once Congress establishes a lever to provide aid or raise revenue, it tends to keep pulling it.
The IRS used to collect taxes only. But in 1975, Congress established the Income Tax Deduction (EITC) to provide assistance to low-income people through the tax law, a policy that was to be temporary. Fast forward 45 years, the tax law and the agency that manages it handed out more than $ 270 billion in direct checks in seven months, according to a 2020 National Taxpayer Advocate Report.
It is unlikely that Congress will stop using tax law as a primary mechanism for providing assistance. That’s why the IRS should embrace its new role as an administrator of social programs, Collins said.
“They should consider it part of the reorganization with a function that specifically works on the social programs, whether it is the EITC, the child tax deduction or other social programs that Congress asks the IRS to work on,” Collins said.
An idea that has gained traction, according to former IRS Chief Counsel Michael Desmond: Divide the IRS into two major subdivisions – one to collect taxes, the other to distribute assistance.
That way, each division could better focus while sharing taxpayer data within the same agency, said Desmond, now a partner at Gibson, Dunn & Crutcher LLP.
“There could be a creative way of doing it – which in a way keeps it under the same agency, but really puts the features in different buckets,” he said.
The biggest benefit of splitting the IRS in two is messaging. A reorganization could help convince Congress to give the agency more money to administer benefits, Desmond said.
“The IRS has been known as the debt collection agency for decades. Who will invite the commissioner to dinner?” said Desmond. There is a “lack of understanding that this agency is actually doing something that benefits you enormously.”