During the pandemic, the IRS struggled immensely with its most basic responsibilities, such as answering taxpayer correspondence and processing tax returns in a timely manner. But with life slowly returning to normal and having received added funding to its taxpayer services account with the 2021 American Rescue Plan Act, surely things are looking up, right?
Wrong. The most recent report by the National Taxpayer Advocate shows that not only has the IRS failed to make a dent in the 20 million return backlog it had at the end of May of last year, but the backlog has actually grown to 21.3 million returns. While the number of amended returns has stayed constant at 3.2 million, original unprocessed returns have grown from 16.8 million to 18.1 million.
Meanwhile, despite an enormous drop in call volume, the IRS is still answering taxpayers’ calls at about the same rate. The number of calls that the IRS received this past tax season dropped off a cliff compared to last year’s, from 167 million calls to 73 million. Even so, the IRS managed to answer just about the same percentage of calls, answering 9 percent in 2021 and 10 percent in 2022.
This combination of backlogs and unresponsiveness is understandably frustrating for taxpayers. Even as the IRS struggles immensely to perform its most basic responsibilities, taxpayers are expected to adhere to the IRS’s rigid deadlines.
In fact, a recent Supreme Court case, Boechler v. Commissioner, concerned whether the U.S. Tax Court could waive the 30-day deadline to appeal an assessment when the taxpayer in question filed their appeal just a single day late. The IRS argued, unsuccessfully, that that single day of tardiness meant that the taxpayer in question lost their right to challenge the IRS’s assessment. Just imagine if the IRS had 30 days to process each taxpayer’s return, and lost its right to challenge a taxpayer’s self-assessment of taxes owed if it took a day longer to process the return.
Such a system, though of course impractical, would at least provide the IRS with the key ingredient lacking to fix its ineffectual taxpayer services: motivation. The IRS continually argues that the missing ingredient is more money, but that’s been tried, most recently last March. The result is always that the IRS floats more trial programs to bring its antiquated systems of paper returns, fax machines, and telephone-based customer service into the 21st-century, then never manages to fully integrate them into their operations.
The most frustrating job in the country must belong to the National Taxpayer Advocate, who has continually and painstakingly explained to the IRS that it should more fully embrace e-filing, implement broad-based virtual chat and secure online document sharing, and create a centralized portal by which taxpayers can view documents the IRS has and upload new ones, among other common sense suggestions, only to be endlessly put off. As such, it’s hard to conclude that the problem is anything but an antiquated agency that has no real reason to embrace change.
Even more insultingly to taxpayers, as the IRS has failed at these most basic tasks, it has continually demanded more money to tilt at the “tax gap” windmill, promising lucrative returns to Congress. Setting aside what are probably wildly inflated estimates of the size of the tax gap and very valid questions about the IRS’s ability to be responsible stewards of taxpayers’ private information, demands for more enforcement funding should be galling to taxpayers at a time when the agency has seemingly given up taxpayer services as a lost cause.
Taxpayers and their representatives in Congress should demand a real change in direction before it even considers expanding the agency’s enforcement budget. Unfortunately, the latest report by the National Taxpayer Advocate signals nothing of the sort.
