Democrats' IRS Fantasy World

KEY TAKEAWAYS

• The IRS has a backlog of nearly 24 million unprocessed forms, and other correspondence sitting in storage, and an “unknown” number of taxpayers received inaccurate information from the agency. Americans trying to resolve these problems have to deal with a customer service nightmare.
• Democrats’ plans for the agency are detached from this reality and fail to prioritize taxpayer needs.
• They would spend billions to target Americans with tax audits, and they insist more funding is the only solution to the agency’s troubles, ignoring its poor record using the money it already gets. 

As Americans navigate the 2022 tax filing season, they are suffering from the continuing dysfunction at the Internal Revenue Service. Democrats’ plans for the agency would make things even worse by ignoring the real problems and targeting middle-class taxpayers with more audits. As with many other policy ideas coming out of the White House, the scheme makes sense only in a Democratic fantasy world that does not resemble what people are dealing with in real life.

Democrats’ Plans Focus on the Wrong Problem

A pile of problems at the irs

The government’s response to COVID-19 increased the IRS’s workload. The agency was tasked with administering three rounds of stimulus checks and the monthly advance child tax credit, in addition to processing its normal tax filing workload. The pandemic and additional duties created a ripple effect that dramatically increased the number of taxpayers seeking help from the agency.

At the same time, the IRS has struggled to manage its own pandemic workplace disruption. Processing centers were closed for an extended period, and agency staff worked remotely for months as tax returns and correspondence piled up in empty offices. Two years later, too many employees have still not returned to the office, undermining customer service and causing the agency to fail at performing its primary job.

The IRS has a backlog of nearly 24 million unprocessed tax returns, forms, and other correspondence. As a result, some taxpayers who did everything right, but whose paperwork sat in IRS storage, received inaccurate delinquency warnings and other threatening notices. In some cases, taxpayers were directed to mail the same tax return the IRS had sitting in storage, only exacerbating the backlog. In response to mounting chaos, the agency recently relented and suspended a few of the automated notices and letters it had been sending.

The IRS also mailed incorrect information to an unknown number of parents who received monthly child tax credit payments last year, compounding tax filing confusion for many families and inevitably causing more tax return delays. Taxpayers trying to get to the bottom of these issues face a customer service nightmare. In fiscal year 2021, the IRS customer service telephone center answered only 11% of calls. Some taxpayers waited on hold for hours only to receive what the IRS calls a “courtesy disconnect.” Delays and poor service frustrate taxpayers – who do not get to opt out of dealing with the nation’s revenue collector – and can cause serious financial strain. 

These problems persist despite the $2.4 billion the IRS received in supplemental funding during the COVID-19 pandemic to cover the added burden of its new assignments, including $1.5 billion from Democrats’ “COVID relief” boondoggle in 2021.

An agenda Detached from reality

Instead of focusing on the many ongoing challenges at the agency, Democrats spent much of last year crafting a bank account reporting scheme that would capture most Americans in a dragnet of bureaucracy and leave more of their personal financial information vulnerable to privacy intrusions. Their reckless tax and spending spree would supercharge the agency with more than $79 billion in additional appropriations. The majority of this would be spent beefing up “enforcement,” which means targeting more Americans with tax audits. An analysis found that nearly half of the increased audits would capture taxpayers earning less than $75,000 a year. Under Democrats’ scheme, the IRS would not have to produce a strategy for how to spend these billions until after it had the cash in hand.

Democrats continue to demand more money as the catchall solution to the IRS’s troubles, ignoring its poor track record of using resources. The Treasury Department’s inspector general for tax administration reported last May that the agency was unable to enforce compliance with the Foreign Account Tax Compliance Act because “after eight years of spending at least $380 million on IRS systems” they still lack the ability to match accounts with taxpayers – often missing something as basic as a Social Security number.

More funding also will not solve institutional inefficiencies. In FY 2021, the IRS took an average of 88 days to fill open jobs with internal candidates and 94 days for external ones. This 12-13 week hiring timeline hurts the agency’s ability to recruit workers in a competitive labor market. The National Taxpayer Advocate bemoaned the failure in testimony to the House Ways and Means Committee this month: “Recently, the IRS announced 5,000 positions in its campuses but only 179 positions have been filled so far.” The IRS cannot efficiently hire people for the job openings it has now. Funding new roles without fixing these issues will result in more phantom jobs, not a solution to the agency’s woes.

As taxpayers face an unnecessary burden from a dysfunctional IRS, Democrats would empower the agency to come after middle-class Americans and give it billions of additional taxpayer dollars without accountability. Once again, Democrats’ priorities are utterly mismatched with Americans’ needs.