February 17, 2022
Sen. Mark Warner (D-Va.) on February 17th asked witnesses during an IRS congressional hearing if the difficulties in the current tax season should prompt delaying the April 18th filing deadline.
“I know there is come debate on this issue, but I’ll ask the panel: Should we go ahead and recognize the backlog that is out there and what’s going to be an already difficult filing season… [should we] look at somewhat of a delay in the filings this year,” he asked witnesses during a Senate Finance Committee hearing on the customer service problems at the IRS.
The answer from witnesses was a resounding ‘no.’
Erin Collins, who testified before the panel in her role as the IRS's National Taxpayer Advocate, was the first to kibosh the idea.
“I don’t think the IRS needs additional time,” she began. “In fact, I think it would cause more challenges for the IRS because they would have to go in and reprogram everything. It also impacts states. It impacts tax preparers. I personally do not see it as a benefit to taxpayers.”
Collins mentioned that taxpayers can already file for extension if more time is needed, although taxes would still need to be paid by the April 18 deadline.
Jan Lewis, a tax preparer and Chair of the Tax Executive Committee at the AICPA, also testified before the committee and was a 'no' the Senator's question.
“The AICPA at this date does not advocate moving the tax due date. We obviously will be monitoring this as things happen,” she said, adding that “most of our members would like to keep the April 18th date.”
However, if the filing deadline is delayed, Lewis said announcing it should be done sooner rather than later.
“If the due date is moved, we want it to be announced as soon as possible,” she said. “It should include not just the filing, but the payment and also the first quarter tax estimate.”
Congress rarely takes into consideration timing when extending tax deadlines. Exhibit A: renewing tax provisions are routinely extended a year after they expire. If lawmakers decide to extend the tax filing deadline (a big ‘if’), it could happen at any moment between now and April 18th.
Sen. Ben Cardin (D-Md.), who sits on the committee, raised the point that unqualified tax preparers have contributed to the backlog at the IRS by submitting fraudulent or error-ridden forms.
Lewis suggested that additional regulations or standards could help end this form of malpractice.
“Hopefully that would weed-out some of those bad actors,” she said, adding that “we have a lot of taxpayers come in who have been victim of individuals who are not qualified to prepare returns. That is something across the country that we need to stop.”
Sen. Cardin was the only committee member to raise the idea of increased compliance for tax preparers.
Senate Finance Chairman Ron Wyden (D-Ore.) stressed during today’s hearing that the processing backlog stems from the agency’s lack of improved information technology.
“The information technology at the IRS is from the dark ages,” he said.
Wyden noted that the IRS has at least 60 different computer systems that do not communicate with each other, which makes communications within the agency difficult.
“They can’t talk to each other. That’s a showstopper,” he said, adding that Republicans’ effort to defund the IRS helped create the current backlog.
“Struggling after a decade of Republican budget cuts that have decimated its staff, technology and operations, the IRS is overwhelmed. Customer service is suffering. Enforcement against tax cheating by the rich has been hollowed out. There’s a huge backlog of returns to work through,” Wyden said.
Sen. Mike Crapo (R-Idaho), the committee’s ranking member, agreed that IT improvements are needed at the IRS, but disagreed that his political party starved the tax agency.
“In the last four or five year the IRS budget has been appropriated at 100% of their budget request,” he said. "This [backlog] was not a problem that came about because Congress was refusing to give the IRS its requested budgets. It’s a problem - which the IRS leadership has told us as recently as a day or so ago – because of the pandemic, which shutdown the IRS just like it shutdown much of the economy.”
Crapo asked witnesses if they knew what the IRS plan was to improve its IT systems. No one knew the answer.
It was repeatedly raised during today’s hearing that there are no online options for certain IRS forms, which adds to the backlog problem that has inundated the tax agency.
The paper problem appeared to frustrate Sen. Maria Cantwell (D-Wash.).
“Technology update. Technology update. Technology update,” she said emphatically.
Witnesses who appeared before the panel agreed that IT improvements should be the first step in reducing the IRS backlog.
Collins recently visited an IRS service center and was “appalled” to see how time-consuming handling paper returns can be.
“They move the returns all the way through by humans,” she said. The process includes separating checks from the forms, removing staples and stamping the returns - all by hand.
“We should be a very high-tech tax administration,” she said.
Several committee members asked the witnesses if they knew how much funding the IRS would need to reverse the current backlog problem. No one knew the answer.
Their lack of response prompted Chairman Wyden to say that he will invite IRS leaders to testify before his committee. The subject of the hearing will be determining the appropriate funding level for the IRS to end the backlog.
Coverage of the House IRS hearing is here.
This is a roundup of tax news and opinion. Any opinions expressed or implied are those of the author and not necessarily those of Eide Bailly. Opinions found in linked items are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall. Items here do not constitute tax advice.