The Daily Beast
‘A perfect storm’: the COVID law can bring IRS anger to exhaustion
REUTERS With a stroke of his pen on Thursday, President Joe Biden began a series of comprehensive pandemic relief measures: checks of $ 1,400 or more for individuals and families, a new child tax credit hailed as a measure revolutionary anti-poverty and a huge tax break for millions of people who received unemployment insurance last year. In an instant, however, the $ 1.9 trillion relief account created an overwhelming amount of work for the government agency charged with making its elevated programs a reality: the IRS. and a widely disliked tax agency was already struggling to achieve its primary annual goal – to process income tax records – even before the American Redemption Plan was approved. On Thursday, he is sending tax refunds 32 percent slower than last year, according to the agency’s weekly statistical report on tax seasons. In February, the IRS’s internal watchdog said that only one in 11 calls to the agency were getting a response. Now, in the middle of the tax reporting season, the IRS’s mission has grown thanks to the pandemic relief plan. First, it must send another round of stimulus checks to a large part of the country’s population. Next, the agency has to work on changes to the unemployment insurance tax bill: with Democrats earning the first $ 10,000 in tax-free benefits, many recipients who have already filed their taxes will want to have access to that benefit, and the IRS has to figure out how to make this easier. In addition, the agency is responsible for preparing a broad expansion of the child tax credit, which will now come in the form of a monthly payment of $ 300 per child, to help millions of families in the coming weeks and months. addition, of course, is the April 15 filing deadline. Some lawmakers have asked the IRS to extend the filing deadline as it did last year, but there is still no indication that this will happen. The IRS did not immediately respond to a request for comment. Among tax policy experts and legislators who closely observe the IRS, these growing obligations and tight deadlines are creating serious anxiety. “I would never say never when it comes to the IRS and its ability to implement new legislation, new challenges, but, man, this is going to be difficult,” said Janet Holtzblatt, senior researcher at Urban-Brookings Tax Policy Center. “There will likely be SNAFUs along the way.” A lobbyist on tax issues put The Daily Beast another way: “It’s a perfect storm.” Proponents of the aid plan are in a somewhat strange position to defend the bill’s ambitious programs while recognizing the pressure that those same programs are putting on the agency and that, in some way, should make everything work. “It is quite predictable that we will be challenged in the future by implementing this bill that is desperately needed,” said Rep. Gerry Connolly (D-VA), who chairs a sub-panel of the House Oversight Committee with jurisdiction over the IRS . “We are asking the IRS, which is a tax collection and audit agency, to become a benefit payment agency as well. This is a big change. This is a long delay in the mission. Postmaster General plans more mail delays, price increases Few expect the IRS to break completely and burn in the coming months or to become unable to perform its main functions. But the widespread suspicion is that it will simply move more slowly and that the quality of service to taxpayers will decrease. “What will happen is that the IRS is good at doing whatever the priority of the moment must be, and then it will sacrifice something else,” said Charles Rossotti, a former IRS commissioner under Presidents Bill Clinton and George W. Bush. What may be in the background, necessarily, are other important, but less urgent functions of the IRS, putting on an even worse basis in the long run. Experts are concerned that the agency may fall back on fulfilling its core compliance mission – ensuring that the people who owe taxes pay them – than before. IRS commissioner Charles Rettig told lawmakers in February that the agency did not collect about $ 570 billion in taxes due in 2019. A study in the same year by the National Bureau of Economic Research found that the so-called “tax gap” could reach $ 7.5 trillion in a decade. Democrats blame Republican IRS budget cuts for this sorry state of affairs. “Republicans have spent the last decade destroying the IRS, so the agency has struggled when it comes to oversight and personnel,” said Senator Ron Wyden (D-OR), chairman of the Senate Finance Committee, which oversees the IRS. won the majority in the Chamber in 2010, the Tea Party Republicans practically delighted in cutting the IRS budget, which they considered emblematic of useless government spending. The emergence of the Affordable Care Act – a program that the IRS essentially imposed due to the centrality of the law’s tax penalty for not having health insurance – made it even more of a GOP goal. Over the decade, the IRS budget has been cut by 20 percent, said Holtzblatt, and its workforce has been cut by almost a quarter since 2010. Modernization efforts have been lagging: the agency depends on technology systems that have been introduced in the John F. Kennedy administration. Even before the pandemic, these factors contributed to delays in reimbursement; President Donald Trump, whose first budget request envisaged cuts of $ 250 billion for the IRS, eventually gave in, asking for more money for tax enforcement in 2019. When the pandemic hit last year, in the middle of the reporting season taxes, the IRS had to process declarations and refunds while figuring out how to issue the first round of stimulus checks – 170 million of them – included in the CARES Act. This effort was largely successful, but there were delays: in October, 12 million Americans had not yet received their checks. And in December, the IRS still had 1 million tax returns to process from 2019, well after the July 15 extended filing deadline. Rettig told Connolly’s committee in October: “We had a phone line for Congress that was essentially overloaded with the volume…. and then I had the brilliant idea of creating an email box so that our people could work 24 hours a day on incoming emails, ”said Rettig. “We received, I think, over a hundred thousand emails from a house.gov or senate.gov [email account]. And then my brilliant idea really overtook us. But it was an effort to try to get there. ”For Congressman Bill Pascrell (D-NJ), who chairs the House’s methods and means subcommittee that oversees the IRS, the agency’s situation is remarkably similar to that of another public institution that suffers from structural issues exacerbated by the pandemic: the service postage from the USA. “It’s not like the IRS is operating a well-tuned machine here,” Pascrell told The Daily Beast. “The IRS reminds me of the post office and how it is managed.” Now that they control the White House and the two chambers of Congress, Democrats are optimistic that they can do more to get the IRS out of the hole with more funding. The last year of the Trump administration has even seen improvements; the IRS budget for fiscal year 2021 increased by $ 409 million from 2020, to a total funding allocation of almost $ 12 billion. In his statement to The Daily Beast, Wyden noted that the American Rescue Plan includes $ 2 billion to help the IRS implement various programs. “We cannot ask the IRS to do more and more and not provide adequate resources,” he said, adding: “the solution here is not one-off financing.” “It is much more difficult for the IRS to build the plane during this flight,” continued Wyden. “We need sustained funding in the long run so that the IRS can build and maintain these systems in the long run.” In the short term, experts are confident that the IRS will promptly issue the next round of stimulus payments, having already had two opportunities to improve the process. Damsel signs a massive $ 1.9 trillion COVID-19 relief bill, but the duty to help qualified taxpayers gain access to a huge tax break on their past unemployment benefits can be tricky. Many will have to change the tax returns they have filed, and the IRS will have to figure out how to help them do this quickly and accurately. “I hope that, since last Friday, when this was announced, the IRS and Treasury lawyers will work around the clock to advise taxpayers on what to do,” said Holtzblatt. “It is not easier for the IRS if taxpayers are confused.” Many tax experts, like Holtzblatt, say it is highly unusual for the government to change tax laws retroactively so late in the filing season. Despite all the converging challenges and the promise of delays, it is not clear whether the IRS will extend the deadline for filing taxes, as it did last year. “It’s a no-brainer for me,” said Pascrell. “The approval of a big stimulus this week is a big victory for America, but part of the [IRS] The responsibility, as well as that of the administration, is to monitor and understand the consequences of what we have promulgated. Rossotti, the former IRS commissioner, told The Daily Beast that the IRS has taken the position that an extension “is not a good idea”. “Changing the filing season does not make things simpler,” he said. “Any taxpayer can get an extension … There is a whole system aimed at a set of dates, it overflows with many things.” Whichever way lies ahead, it will not be easy for the IRS. Rettig is due to testify in front of the House’s Means and Means Committee next week, and Pascrell said it is “better” to have answers on how they plan to maintain proper service to taxpayers. His colleague, Connolly, was not entirely ready to blame Congress for the situation. But he offered a reflection: Legislative bodies like Congress, he said, “often don’t pay attention to implementation and delivery. They believe that when they passed the law, they solved the problem. ”Read more at The Daily Beast. Get our top news in your inbox every day. Subscribe now! Daily Beast Membership: Beast Inside goes deeper into the stories that matter to you. To know more.