President Joe Biden’s proposed 2023 budget for the Internal Revenue Service funds more taxpayer audits at a time when millions of tax returns sit unprocessed, and customers calling the agency for help face long delays, according to Sen. Mike Crapo (R-Idaho).
“For the third filing season in a row, taxpayers confront vexing customer service challenges as they attempt to fulfill their tax filing obligations. With tens of millions of 2021 tax returns still to be filed, the most recent data we have on this year’s season is concerning, highlighting longstanding issues the IRS has not adequately addressed,” he told a Senate Finance Committee hearing. Crapo is the ranking Republican on the panel.
“For example, more than 60 percent of the millions of items of taxpayer correspondence and amended returns have sat in storage for more than three months, an increase of nearly 30 percent over last year,” he said. “Average hold times for the lucky few taxpayers who reach the IRS by phone are 28 minutes, an increase of nearly 50 percent over last year.
“Scores of taxpayers have seen refunds delayed while their return is suspended for various reasons. Millions of prior-year tax returns await processing. The IRS’s management of paper-filed returns is a persistent problem that the National Taxpayer Advocate recently noted goes back decades.”
Instead of addressing the customer service problems, Biden’s budget proposal puts more tax dollars behind auditing more tax returns and stricter enforcement of the tax code, Crapo said.
“This year’s presidential budget request seeks a large enforcement funding boost, and its ‘reserve fund’ placeholder for the reckless Build Back Better legislation would provide a truly massive $80 billion infusion of mandatory funding, primarily focused on enforcement. The reserve fund could also accommodate the administration’s chilling proposal to monitor Americans’ bank account flows of as little as $600,” he said.
The finance panel’s chairman, Sen. Ron Wyden (D-Ore.), agreed that the IRS processes tax returns too slowly and leaves too many customer requests for help unanswered, although he pointed to what he called “years and years of Republican cuts” to the IRS budget as the cause of such problems.
Wyden said the IRS currently has a backlog of 12 million tax returns waiting to be processed, and he said IRS agents answer only 11 percent of the millions of telephone calls that come in from customers seeking help with their returns.
“The number of revenue agents at the IRS, the people who audit tax returns, is currently a third of what it was a decade ago. The officers who collect unpaid taxes are down by nearly half. The agency has the same number of employees it did in 1970, when the country’s population and economy were a fraction of the size they are today,” Wyden said.
“Look at the big picture. As a result of years of Republican budget cuts, IRS customer service is struggling at best, wealthy tax cheats are getting away with breaking the law, and the burden of tax enforcement has been shifted onto working people who spend every day walking a tightrope.”
The IRS annual budget for the current year is $12 billion.
Charles Rettig, the IRS commissioner appointed in 2018 by President Donald Trump, told the hearing the tax agency is making significant progress in its ability to process electronically filed tax returns, but still lags in adopting current technologies that could significantly speed processing for paper returns.
“Taxpayer service remains the most significant IRS priority, and funds provided by Congress have allowed us to implement many innovative strategies to reduce our current and projected unprecedented inventories and to get it healthy by the end of calendar year 2022, which is our commitment,” Rettig said.
“With respect to the 2022 filing season, we are off to a healthy start with respect to our tax processing and the operation of our IT systems. Through April 1, we have processed more than 89 million returns and issued more than 63 million refunds totaling more than $204 billion.”
Rettig said taxpayers who filed electronically are getting refunds back an average of 21 days later.
Pressed by several committee members on why the agency has been slow to adopt bar code processing for paper returns, Rettig said the agency had requested such funding every year from 2013 to 2017 but didn’t receive it. There’s initial funding in the Biden proposal to begin bar code adoption, he said.
The IRS chief thanked Congress for giving the agency direct hiring authority in the recently approved funding resolution to hire up to 10,000 new customer service representatives, but he said such positions are only paid initially on average $37,000 annually.