When I was in college, I had a friend who had never had to worry about money. I was not quite so lucky. One evening, as we were on our way back to the dorms, she proposed that we stay out a little longer. I could not, I told her, as I was out of money. She offered to stop by the bank so that I could get more money from the ATM. I had to explain to her that there was nothing in the ATM for me to withdraw—I was, quite literally, out of money.
What feels like simple math isn’t always simple. Limits can be difficult to understand, especially when you’re not the one worried about counting the money. The same rings true in government—as taxpayers have discovered over the past few years.
Most taxpayers know that the IRS is tasked with collecting tax revenue. In recent years, the agency has collected more than $3 trillion, accounting for 96% of the revenue needed to fund the government.
IRS Budget Woes
Over the same period, refunds and collections have increased, as has the number of returns filed. According to National Taxpayer Advocate Erin Collins’s report to Congress, the number of individual taxpayers the IRS serves has increased by about 19% since 2010, with the number of Forms 1040 rising from 142 million in that year to about 169 million in 2021.
The IRS has also been charged with administering several new programs, including issuing three rounds of stimulus checks and the expanded child tax credit payments. Also on the IRS’s plate? Carrying out parts of the Affordable Care Act and reporting large debtors to the State Department for passport revocation.
As the IRS’s task list grown, the agency has been forced, as former IRS Commissioner
Congress Boosts Funding
Last week, Congress passed a $1.5 trillion omnibus spending deal (H.R. 2471) that included a 6% boost for the IRS—the $675 million increase is the agency’s most significant funding boost since 2001, according to the National Treasury Employees Union. President
IRS funding in the bill was earmarked for taxpayer services, including filing and account services, as well as money for the Taxpayer Advocate Service. Dollars were also targeted for enforcement, including criminal investigations for tax and financial crimes, and new technology. And in a nod to the IRS’s current backlog, money was also set aside to tackle the paper inventory of amended returns, correspondence, and adjustments to return filings.
The Size of the Problem
On March 9, 2022, the Treasury Inspector General for Tax Administration released a report on the IRS’s 2021 filing season. They noted that “Inventory backlogs from the 2020 Filing Season continued to affect the IRS’s ability to provide timely service to taxpayers in the 2021 Filing Season.”
How far behind was the agency? As of the week ending Dec. 28, 2019, the IRS had 183,000 paper tax returns waiting to be processed. By the same time in 2020, the agency had 3,540,486 paper tax returns waiting to be processed—an increase of 1,835%. In addition, 110,443 amended returns were awaiting processing at the end of 2019. By the end of 2020, that number had ballooned to 1,477,911—an increase of 1,238%.
And that backlog only got bigger. The Taxpayer Advocate had noted in her report to Congress that the agency “was behind before the 2021 filing season had even started.” TIGTA’s report confirmed that backlog inventories associated with the 2021 filing season were more extensive than those resulting from the 2020 filing season, warning, “The inability to timely process tax returns and address tax account work will continue to have a significant impact on the associated taxpayers.
According to TIGTA, a significant barrier to resolving the backlogs was a lack of sufficient personnel. As of May 18, 2021, the IRS had a hiring shortfall of 814 individuals needed simply to meet demand in its Tax Processing Centers in Kansas City, Mo., and Ogden, Utah—the two sites where the majority of individual and business returns are processed.
That doesn’t count other hiring holes in enforcement, technology, and customer service. Those staffing vacancies were felt by taxpayers, too. TIGTA found that as of May 28, 2021, taxpayers made 185 million total attempts to contact the IRS by calling the various customer service toll-free telephone assistance lines. The IRS only answered 11.4 million calls in person, with another 25.6 million calls answered by automation. That means around 150 million calls went unanswered.
But this latest boost to the agency’s budget could change that.
IRS Touts Job Opportunities
With the promise of more money on the horizon, Deputy Secretary of the Treasury
Adeyemo, together with IRS Commissioner
The agency also plans to immediately begin filling positions at a new call site in Mississippi. Around ten new employees are expected to staff the Automated Collection System (ACS) site, answering calls from taxpayers.
More about those IRS job opportunities can be found on the IRS Careers website.
What Comes Next
The IRS is also taking advantage of new technology, including automation, to make a dent in its caseload. Last filing season, any error on a tax return required manual review, meaning that just a few dozen such returns could be processed each hour. For this filing season, the IRS is using an automated tool that it says allows it to close 1.5 million error resolution cases in a single week.
There’s clearly a lot happening to try and eliminate the backlog, putting delayed tax refunds into the hands of taxpayers—and revenue into the government’s coffers. And while no one is suggesting that throwing money at the problem will make it go away, it should provide some much-needed relief.
Is this funding boost a trend? We’ll see. The omnibus only provides money through September of this year. That means in fall, we’ll do this all over again. But for now, it’s a start.
This is a weekly column from Kelly Phillips Erb, the Taxgirl. Erb offers commentary on the latest in tax news, tax law, and tax policy. Look for Erb’s column every week from Bloomberg Tax and follow her on Twitter at @taxgirl.
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