A House subcommittee on February 8th examined the issues plaguing the current tax filing season that has already overwhelmed the IRS, taxpayers and tax preparers.
“The backlog of returns and correspondence is delaying refunds and causing numerous issues for both individuals and businesses,” said House Ways and Means Oversight Subcommittee Chairman Bill Pascrell (D-N.J.), who ran today’s hearing.
The 2022 filing season began on January 24th, which was roughly two weeks ago. As new returns hit the IRS for the current season, the agency becomes more overwhelmed since its employees are still processing roughly 16 million tax returns from past filing seasons.
Erin Collins, the National Taxpayer Advocate, said the backlog of returns is the primary reason for why the IRS is falling behind with its responsibilities.
“We have no option to clean up the backlog,” she told the subcommittee, and recommended that the hiring of 1200 new IRS staff would be a “good first step.”
“I do believe we will need more than the 1200,” she said, adding that increased electronic filing would also help with the processing backlog.
Hiring 80,000 new IRS staff was mentioned during the hearing.
Collins was the sole witness at today’s hearing. Her group, the National Taxpayer Advocate, is a watchdog over the IRS to ensure that taxpayers’ rights are respected. It also makes recommendations to Congress on how to address issues that it discovers.
Rep. Tom Rice (R-S.C.), the subcommittee’s ranking member, noted that technology might be a reason for the agency’s backlog. He noted that its computers rely on COBOL programing from the 1980’s, and few within the agency can fix it if it breaks down.
“The fact that we are at 1980’s technology is absurd,” he said.
This year’s tax season is not the first to be a rough ride for tax preparers and the IRS, according to Pascrell.
“We’ve been talking about this for ten years – at least,” he said, adding, “we don’t seem to be making much progress.”
The Taxpayer Advocate issued a report on January 12th that showed last year’s season was also extremely challenging.
Subcommittee Member Jackie Walorski (R-Ind.) said she felt “like a broken record” when it comes to holding a hearing on the IRS and its filing backlog.
“There seems to be no end in sight,” she said.
Lack of funding is nothing new to the IRS. Between 2010 and 2020, funding fell by 21% when accounting for inflation, according to the Tax Policy Center.
Lack of funding begets staffing shortages, which begets fewer audits, according to the IRS. During fiscal year 2020, the IRS closed 509,917 tax return audits, according to the 2020 IRS Data Book (the most recent publication). That’s down from the 1.5 million audits conducted in fiscal year 2010.
A recent report by former Treasury Secretary Larry Summers and law school professor Natasha Sarin found that increasing the IRS budget by $100 billion over ten years would increase revenue by $1.15 trillion. Of that amount, $715 billion of it would come from an increased number of audits.
Rep. Rice, however, stressed that the IRS has $1 billion in unspent funding and he wondered aloud why the agency has not used this money to increase staffing.
“Money is not always the problem, but if it is, the agency has enough of it lying around,” Rice said, adding, “more long-term funding is not the answer to today’s problem.”
The Congressman posed that technological improvements could help dwindle the filing backlog at the tax agency.
Chairman Pascrell gaveled the hearing to a close without saying what the next steps would be to address the IRS's backlog problem.