The processing backlog that plagues the IRS stems from a “perfect storm” of work overload caused by the pandemic and lackluster funding, according to an executive who represents IRS employees.
“It’s kind of a perfect storm,” Doreen Greenwald told The Tax Policy Center’s “The Prescription,” which hosts online conversations about tax policy.
“I think a percentage of it is Covid… But I would have to say that the underlying and the primary issue is the lack of resources and the lack of proper funding,” Greenwald said, who is the National Executive Vice President at the National Treasury Employees Union, which represents 60,000 IRS employees.
The additional work brought on by legislation to combat the pandemic essentially hit as the IRS was struggling to fill posts left open by retiring workers.
“As people retire it’s harder and harder to replace them…[meanwhile] the current situation [pandemic] is creating more paperwork than they anticipated,” Greenwald said.
When the coronavirus hit the nation, the IRS did like most organizations and told their employees to work remotely. But many of these employees were responsible for delivering to taxpayers the benefits from Covid-relief packages, which is hard to fulfill while at home, so work piled up until employees could return to the office.
“Whenever you have a brief halt to the current day-to-day operation, that takes its toll,” Greenwald said. “Adding on the additional work of the economic stimulus payments and the childcare payments added work that wasn’t there before [the pandemic].”
Processing amended returns also increased during the pandemic, which added to the workload. The paper problem was possibly made worse because the agency did not respond to taxpayer inquiries about the progress of their returns.
“Taxpayers, when they can’t get through to people to answer calls or address their mail, they probably summitted multiple items. And so how much of that backlog is duplicate? We just don’t know until they work through it,” Greenwald said.
The IRS has a backlog of roughly 24 million unprocessed documents, which is comprised of 17.6 million tax returns and about 5.9 million pieces of taxpayer correspondence/Accounts Management cases (excluding amended tax returns), according to the watchdog group the National Taxpayer Advocate.
Greenwald estimated that the IRS has likely never encountered a problem like the current backlog.
“It’s a very serious backlog,” she said. “I worked for the IRS for 35 years [and] I would say the backlog is probably something they have never seen before.”
Funding Issues:
The IRS has faced budget cuts over the last decade, hindering its ability to serve the American people in fundamental ways, according to the House Budget Committee. Then came the pandemic, which made the situation worse.
The tax and spending reconciliation bill (aka: Build Back Better) would provide $80 billion to the IRS over the next ten years. That funding is currently stalled in the Senate. Greenwald would consider its enactment a “good start.”
“It’s a really good start… Right now, the funding that they [Congress] is talking about is sustained fund,” Greenwald said. She considers sustained funding important to ensue the IRS can handle its responsibilities.
“People think you just go out and hire people and they can start working at the Internal Revenue Service. It takes a while for new hires to be trained and actually be able to perform the work that they have been hired for,” she said, adding that preparing a worker for their job can take between six months and three years.
Greenwald also discounted the idea of the IRS shuffling workers around to reduce the backlog.
“Basically, what he [the IRS Commissioner] is looking at is assigning workers from one area to work in another [area]… These workers are needed in the area they currently work. You’re basically moving people around to try and deal with where there is currently a backlog and will likely end up creating a backlog someplace else,” she said.
Voluntary Tax Compliance:
Greenwald stressed that voluntary tax compliance is hard to expect when the IRS can’t respond to taxpayers’ questions or process a return within a reasonable timeframe.
“If you want to have voluntary compliance, you need to make it as easy as possible and be able to answer people’s questions,” she said, adding, “All of these pieces to the puzzle must function appropriately for the system to work. And without the proper funding and hiring, that system is on the verge of collapse.”
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