GOP Cuts at IRS Delay Pandemic and Tax Refund Checks, Hill Democrats Say

October 7, 2020 Updated: October 7, 2020

Internal Revenue Service budget and staffing cuts by Republicans in Congress are why the tax agency has yet to process millions of 2019 tax returns and CCP virus economic recovery checks, according to Rep. Gerald Connolly (D-Va.).

“According to the Congressional Budget Office, from 2010 to 2018 when Republicans were in control of the Congress, lawmakers cut the IRS budget 20 percent in inflation-adjusted dollars,” Connolly said.

Connolly’s comment came as he opened a hearing of the House Committee on Oversight and Government Reform’s subcommittee on government operations.

The hearing was on the IRS’s performance in processing tax returns and the Economic Impact Payments (EIP) authorized by Congress earlier this year in response to the national downturn caused by the disease.

The budget cuts caused “a 22 percent staff reduction, with 30 percent of these reductions in the IRS enforcement positions,” Connolly said. “After years of disinvestment in IRS enforcement capacity, unpaid annual taxes owed but not collected are estimated at $450 billion a year. The starvation and chronic underfunding also prevented the IRS from investing in information technology (IT) systems.”

Connolly cited a Treasury Inspector General for Tax Administration (TIGTA) report that found 75 percent of the 400 IT systems operated by the IRS to be “legacy systems, meaning very old.”

Rep. Carolyn Maloney (D-N.Y.), the chairwoman of the Oversight Committee, echoed Connolly’s comments, claiming that “after years of partisan attacks and neglect, it was no surprise that the IRS was not prepared to handle the unique circumstances that the coronavirus crisis presented.”

Rep. Jody Hice (R-Ga.), the subcommittee’s ranking Republican, disputed Connolly’s description.

“About the IRS starving for funds, I would just say for the record in reality that 2010 was kind of a high-water mark year for IRS funding,” Hice said. “And what did they do when they had that kind of funding? They held lavish conventions, there were ridiculous videos, there was targeting of conservative groups, and I think it’s important for these types of things to not be repeated.”

Hice was referring to the scandal that erupted in 2013 after it was learned that IRS officials under Lois Lerner, a senior agency executive, had targeted Tea Party, conservative, and evangelical nonprofit applicants seeking tax-exempt status for extra scrutiny during the 2010 and 2012 congressional and presidential campaigns.

But Connolly and Hice agreed that IRS delays in processing 2019 tax refunds and EIP payments are “unacceptable.”

Hice told IRS Commissioner Charles Rettig that “18 million [paper tax returns] filed and 5.5 million backlogged and nearly 3 million that were unopened is frankly an unacceptable amount. We are hearing from our constituents right and left that their tax returns have not come back.”

When Hice asked when individuals who filed paper tax returns can expect to receive their refunds, Rettig responded that “we are processing our backlog at a rate of about 1.3 million per week, which I think is exceptional. In the March-April timeframe, we were looking at about a 23 million backlog.”

Rettig said his agency receives 300,000 to 500,000 new pieces of mail each week, and he claimed IRS processes 632 tax returns per second without any IT errors.

“In terms of IT efficiency, it should be noted that in filing season 2019, we set records for processing per second, per hour, and per minute, and we broke those records in filing season 2020 during the COVID pandemic, with most of our facilities shut down.”

Vijay A. D’Souza, director of information technology and cybersecurity for the Government Accountability Office (GAO) told the subcommittee that the IRS is unable to compile a complete list of all of its IT systems that are obsolete.

Using obsolete IT systems creates unnecessary problems for agencies because “they rely on older technology and it can be harder to find people to employ to keep it updated. You have a limited range of vendors who support that technology.”

Asked by Connolly what it would cost to replace all of the obsolete IT systems at the IRS, D’Souza said he couldn’t provide an estimate, but he added that “the modernization plans we’ve looked at are good first steps, but they don’t actually address what it would take to fully retire these legacy systems.”

Connolly said the subcommittee will formally ask the GAO to investigate the problem and report back to Congress with a comprehensive catalog of how many obsolete IT systems are now being used by the IRS.

Contact Mark Tapscott at Mark.Tapscott@epochtimes.nyc