The tax season of 2022 has definitely been rather disorderly for the Internal Revenue Service due to the considerable difficulties, consisting of staffing scarcities and stockpiles of income tax returns. The IRS dealt with an extraordinary quantity of work throughout the 2021 filing season due to the fact that of the pandemic. The firm began this year with a stockpile of more than 8.4 million unprocessed private income tax returns and deals, according to a preliminary report by the Treasury Inspector General for Tax Administration.
The stockpile of private income tax returns had to do with 13 times more than the stock experienced prior to the pandemic, according to the report.
In addition, the accounts management function of the IRS, which is charged with helping taxpayers with questions, reported more than 8 million pending cases at the end of 2021.
The bureau continues to process countless income tax returns from earlier years in addition to the millions gotten throughout the present filing season.
Internal Revenue Service Commissioner Charles Rettig just recently testified before the Senate that the bureau took actions to lower the stockpile by the end of 2022 and begin the 2023 filing season with a “healthy level” of inventories.
Every year, around 10 percent of the American people submit their income tax returns by paper. Processing paper returns trigger hold-ups and increase the IRS’s work considerably, tax professionals state.
“Paper is the IRS’s Kryptonite,” according to Erin Collins, the national taxpayer advocate who heads an independent organization within the IRS.
The agency “is still buried in it,” she said in her testimony before the Senate Finance Committee in February. “There is no doubt that paper processing remains the agency’s biggest challenge, and that will continue throughout 2022.”
The backlog at the IRS, however, is not a new issue.
The current chaos is largely due to a long-standing trend in fiscal policy, according to the Tax Foundation, a tax policy think tank.
“For the past few decades, policymakers have increasingly relied on the tax code to deliver major social spending initiatives,” the think tank’s recent report stated.
In addition to collecting taxes, the IRS has been given the responsibility of administering social benefits. The IRS’s capacity, however, has not grown fast enough to meet these new tasks, according to the report. The political desire to increase its budget also weakened.
And the pandemic has compounded the problems. The agency was heavily used to disperse pandemic aid in three major rounds of relief legislation, including the $1.9 trillion American Rescue Plan enacted in March 2021.
The IRS was in charge of distributing the majority of the funds, including the stimulus payments and the monthly child tax credit, to eligible families.
In the first two weeks after Biden signed the stimulus bill in March 2021, for example, the IRS processed 127 million payments worth nearly $325 billion.
The agency received additional funding to manage the relief payments, but the programs far exceeded the IRS’s capacity. In addition, the agency received a record 282 million telephone calls in 2021. According to Collins, only around 32 million, or 11 percent, of those calls were answered by IRS customer service agents.
“In the long term, the most stable solution is to move social spending out of the tax code and let the IRS focus its resources on revenue collection,” the Tax Foundation recommended.
The agency plans to hire an additional 10,000 personnel to solve backlog issues. Rettig stated that 5,000 would be employed in the next several months and an additional 5,000 would be hired over the next year.
However, the tight labor market makes it harder to attract and retain talent for the IRS, as well.
“Due to the challenges of hiring during the pandemic and competition from other employers for the same talent, this environment is an exceptionally difficult one for hiring,” Rettig said.
The Great Resignation, which has harmed businesses across all industries, has also affected the IRS.
Many workers retired or left their jobs last year due to the COVID. More than 5,000 workers are also expected to retire this year. In addition, roughly a quarter of the workforce is approaching retirement age.
It has grown more challenging for the IRS to retain staff, especially those in tech roles, according to Tax Foundation’s Garrett Watson.
There’s already a very small group of computer engineers and IT specialists who understand the language and how to use the software at the IRS, Watson told The Epoch Times.
This makes it more difficult, he noted, to lure these individuals away from the private sector that provides a better salary.
Additionally, a lack of personnel hinders the IRS’s auditing capabilities.
“We can no longer audit a respectable percentage of large corporations,” Rettig said in his testimony.
“These corporations can afford to spend large amounts on legal counsel, drag out proceedings, and bury the government in paper. We are, quite simply, ‘outgunned’ in our efforts to assure a high degree of compliance for these taxpayers.”
H/T The Epoch Times