I had a friend in college who had never had to worry about money. I wasn’t as fortunate. On our walk back to the dorms one evening, she suggested that we stay out a little longer. I couldn’t because I was out of money, I informed her. She volunteered to drive me to the bank so I could use the ATM to acquire additional money. I had to explain to her that there was no money in the ATM and that I was really out of money.
What appears to be straightforward math isn’t necessarily straightforward. Limits might be tough to comprehend, especially if you aren’t the one doing the counting. The same can be said of government, as taxpayers have realized in recent years.
The IRS is responsible for collecting tax money, as most taxpayers are aware. The agency has collected more than $3 trillion in recent years, accounting for 96% of the revenue needed to finance the government.
Budget Problems at the IRS
The agency’s budget, on the other hand, isn’t quite so generous. The IRS budget for the fiscal year 2020 is roughly $2 billion lower than it was ten years ago.
Staffing has certainly suffered as a result of the cuts. The IRS had approximately 95,000 full-time equivalent positions in the fiscal year 2011, but that number had fallen to 75,773 in the previous fiscal year.
Refunds and collections have increased over the same period, as has the number of returns submitted. The number of individual taxpayers served by the IRS has increased by roughly 19 percent since 2010, according to National Taxpayer Advocate Erin Collins’s report to Congress, with the number of Forms 1040 rising from 142 million in 2010 to almost 169 million in 2021.
The IRS has also been tasked with implementing several new initiatives, including three rounds of stimulus checks and payments for the enlarged child tax credit. Also on the IRS’s to-do list? Parts of the Affordable Care Act are being implemented, as well as reporting significant debtors to the State Department for passport revocation.
As the IRS’s worklist grew, it was pushed to “do more with less,” as former IRS Commissioner John Koskinen put it. Those days, though, maybe come to an end.
The United States Congress has increased funding.
According to the National Treasury Employees Union, Congress passed a $1.5 trillion omnibus budget bill (H.R. 2471) last week that contained a 6% raise for the IRS—the $675 million raise is the agency’s largest funding gain since 2001. On March 15, President Joe Biden signed the 2,741-page bill into law.
The bill included financing for IRS services, including filing and account services, as well as money for the Taxpayer Advocate Service. Criminal investigations for tax and financial offenses, as well as innovative technology, were also targeted for enforcement. Money was also set aside to deal with the paper inventory of amended returns, communications, and revisions to return files, a nod to the IRS’s current backlog.
The Scale of the Issue
The Treasury Inspector General for Tax Administration issued a report on the IRS’s 2021 filing season on March 9, 2022. “Inventory backlogs from the 2020 Filing Season continued to have an impact on the IRS’s ability to deliver timely service to taxpayers in the 2021 Filing Season,” they said.
What was the agency’s position at the time? The IRS had 183,000 paper tax returns awaiting processing as of the week ending December 28, 2019. In 2020, the government had 3,540,486 paper tax returns awaiting processing, up 1,835 percent from the previous year. In addition, by the end of 2019, 110,443 revised returns were awaiting processing. By the end of 2020, that number had risen to 1,477,911, a 1,238 percent increase.
And the backlog grew even larger. In her report to Congress, the Taxpayer Advocate stated that the IRS “was behind before the 2021 filing season had even begun.” “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’s report, which confirmed that backlog inventories associated with the 2021 filing season were more extensive than those associated with the 2020 filing season.
A primary hurdle to clearing the backlogs, according to TIGTA, was a lack of sufficient people. The IRS had an 814-person hiring gap as of May 18, 2021, only to keep up with demand at its Tax Processing Centers in Kansas City, Mo., and Ogden, Utah—the two locations where the majority of individual and company returns are handled.
Other recruiting gaps exist in law enforcement, technology, and customer service. Taxpayers were also affected by the staffing shortages. TIGTA discovered that between May 28, 2021, and May 28, 2022, taxpayers attempted 185 million times to contact the IRS by contacting the various customer care toll-free telephone assistance lines. Only 11.4 million calls were answered in person by the IRS, with the remaining 25.6 million handled by technology. Around 150 million calls remained unanswered as a result of this.
However, the recent increase in the agency’s budget may change that.
IRS Announces Job Openings
With more money on the way, Deputy Secretary of the Treasury Wally Adeyemo outlined a strategy for dealing with the backlog. “Since the pandemic began, IRS personnel have been called upon to go above and above for the American people, and they have risen to the occasion,” he explained. But they’ve had to do it with insufficient resources and financing, which is why the agency is currently facing difficulties.”
Adeyemo and IRS Commissioner Charles Rettig then announced intentions to fill 5,000 unfilled positions in the next months, to hire 5,000 more people in the future year. The first new employees will work in processing centers in Austin, Texas, Kansas City, Missouri, and Ogden, Utah. The temporary, term and permanent positions are available.
The business also intends to start hiring at a new call center in Mississippi right away. The Automated Collection System (ACS) facility will be staffed with around 10 new staffers who will answer taxpayer calls.
What Will Happen Next?
The IRS is also utilizing new technology, such as automation, to help reduce its caseload. During the previous filing season, any inaccuracy on a tax return required manual inspection, which limited the number of returns handled per hour to a few dozen. The IRS is utilizing an automated program this filing season that it claims allows it to close 1.5 million error resolution cases in a single week.
A lot is going on to attempt to clear the backlog and get taxpayers their delayed tax refunds—and income into the government’s coffers. While no one claims that pouring money at the problem would solve it, it should bring some much-needed relief.
Is this a new trend in funding? We’ll have to wait and see. The money from the omnibus is only available through September of the current year. That means we’ll start all over again in the fall. But it’s a start for now.