As the Internal Revenue Service begins accepting tax returns for the 2021 tax year Monday, officials are warning that the agency is facing “enormous challenges” during this tax filing season in the wake of the COVID-19 pandemic.
A report prepared for Congress last week by the National Taxpayer Advocate says that the IRS "is in crisis and needs to apply resources to its core mission – processing returns and paying the corresponding refunds."
The IRS is still dealing with backups in processing returns from the past two filing seasons. As of December, the agency had more than 6 million unprocessed individual tax returns, 2.8 million unprocessed business returns and roughly 4.75 million pieces of general taxpayer correspondence, according to the report.
The report warns refunds may get delayed again and many calls to the agency’s help lines may go unanswered.
“I would say right now is probably the most stressful of the entire year,” said Tony Reardon, president of the National Treasury Employees Union, which represents employees working in 34 different government agencies, including IRS workers.
Reardon said workers are feeling the strain. The difficulty this season stems from office closures related to the pandemic and an increased workload from new benefit programs, such as the monthly child tax credit payments and lingering stimulus payments from last year.
“Employees recognize that they are not able to answer all the calls, do all the things they want to do, to perform the services necessary for the American people, that’s a difficult thing for employees as well and really brings the morale down,” Reardon said in an interview with Spectrum News.
Old technology and budget cuts are also adding to the crisis: The IRS has 20 percent fewer workers than ten years ago and the same staffing levels as 50 years ago when it had far fewer returns to audit. The agency currently has fewer auditors now than it has employed at any time since World War II. As a result, the Treasury Department estimates the agency is unable to collect 15% of the taxes that are owed to the federal government.
“It’s not a matter of if the IRS system is going to break, it’s a matter of when," Reardon said. "And I think we are now at a situation where we are starting to see the system is starting to break."
Watchdog groups say that staffing cuts have led the IRS to focus on the simpler returns of low income taxpayers, causing a decline in audits of high-income filers. According to the report from the National Taxpayer Advocate, more than half of the individual audits the IRS conducted in fiscal year 2019 were completed on lower income taxpayers.
Mark Everson, the IRS commissioner under President George W. Bush and the current vice chairman at tax consulting services firm Alliantgroup, acknowledges the agency needs help.
“I would add money for systems and for people.," Everson said in an interview with Spectrum News. "I wouldn’t add as much as they are suggesting. They want to double the number of its workforce. I would like to see them add 3-5 percent a year in terms of real growth just to get it back to where it's healthy."
Experts are urging Americans to file their 2021 tax returns online and as soon as possible to avoid delays in processing and receiving refunds.
"Be painstakingly thorough in getting your documentation together before you start to complete the return. Make sure you take into account different payments you’ve received from the government,” Everson advised.
Currently, the IRS budget is approximately $12 billion. The agency received $2 billion in funding as part of President Joe Biden’s American Rescue Plan and the upcoming budget calls for a 15% increase in funding for the agency.
Biden's Build Back Better bill calls for giving the IRS $80 billion over the next decade, including $44 billion towards enforcement spending. The White House estimates would net roughly $400 billion in revenue, though the Congressional Budget Office estimates would increase revenues by $200 billion over the decade. But that initiative has stalled in Congress as lawmakers look to retool the sweeping social spending and climate change measure.
Reardon said more long-term funding is crucial, pointing out the gap between the workload and resources at the agency has never been greater.
“There just aren’t enough people to do the job, then all that work is left to fall onto the shoulders of the people that are there,” Reardon said.