A HELLISH TAX SEASON
While tax season is never exactly a barrel of laughs, for many taxpayers this year could shape up to be the filing season from hell.
Don’t take it from me. These are warnings from U.S. Treasury officials, who are trying to brace the public for refund delays, service disruptions, interminable telephone-hold purgatories and other unpleasantries that taxpayers will face over the next few months.
This (second consecutive) difficult tax season might not only leave today’s taxpayers seething. It could also well scar the government’s continued ability to fund itself for decades to come.
Problems at the IRS began long ago. The agency’s funding has been gutted, down nearly 20 percent on net in inflation-adjusted terms since 2010. During that time, the U.S. population has grown. The tax code has also become increasingly complex. (To be clear: That’s Congress’s fault, not the IRS’.)
What’s more, Congress has dumped additional burdens upon this threadbare agency, including responsibilities related to Obamacare and the Foreign Account Tax Compliance Act.
Then came COVID-19. The agency’s mail centers were shut down for months in 2020. Illness knocked much of its customer service workforce out of commission. Employees working remotely scrambled to figure out how to handle paper-based caseloads.
Amid all this, Congress had the IRS set up entirely new safety-net programs — working from scratch, often remotely, using 1960s IT and with little prep time. First, the agency issued several rounds of stimulus payments to most American households; then a monthly child allowance to the parents or guardians of nearly every child in the United States.
Under the circumstances, the agency executed these new emergency responsibilities admirably. Heroically, even. But customer service — always abysmal — worsened.
In fiscal 2021, 282 million taxpayers tried calling the IRS for assistance, but only about 11 percent of them (32 million) reached an IRS employee, according to the national taxpayer advocate’s recent report to Congress. (The previous year, 24 percent of callers got through.)
Many were desperate to reach someone, anyone, because they had questions about how to abide by the law, given pandemic-era changes to the tax code. Others were desperate to figure out what was holding up their refunds.
In 2021, for instance, the IRS sent more than 14 million notices to taxpayers saying the agency had identified a “math error” on their return. Most of these “errors” were flagged as related to claims for (legitimately confusing) unpaid stimulus payments. That left refunds in limbo, sometimes for many months, until the matter could be resolved.
Backlogs swelled, setting the agency up for a terrible start to the upcoming filing season. Normally the IRS starts the season with about 1 million pieces of backlogged documents; this year, Treasury officials say, they have “several times” that amount.
Recent changes to the child tax credit are also likely to complicate things, both because the credit was partly paid out in advance last year and because a lot of people who never had to file taxes before will probably do so this year because they’ve become newly eligible for the credit.
Between these policy changes and tax-filing novices, there will be plenty of opportunity for additional “math” and clerical errors. And, presumably, even more delays in processing. And even more aggravation for honest taxpayers.
The Biden administration has made a lot of noise about its requests for more auditing and enforcement funds, which the IRS absolutely needs. But the run of snafus suggest it needs a lot more money for customer service, too. The IRS received $2 billion from last year’s stimulus package, which it has used in part to expand customer service, a Treasury official said.
Brace yourself for refund delays, service disruptions, interminable telephone-hold purgatories and unpleasantries.
There is a long-term risk to these frustrating filing seasons. Historically lawabiding, compliant taxpayers might grow less lawabiding and more noncompliant. When people can’t get answers to basic questions — can’t even get anyone on the phone! — they might give up on trying to find the right answer. They might cut corners.
They might even deliberately shortchange Uncle Sam, particularly if they believe their richer neighbors are already shirking.
“If you don’t start paying attention to the needs of the bulk of the taxpayers, you’re going to have more enforcement problems down the line,” says Nina E. Olson, the former national taxpayer advocate who now runs the Center for Taxpayer Rights. She notes that paying for more customer service employees up front could reduce the need for more expensive, specialized auditing officials in the future.
Simplifying the tax code would go a long way too, of course. Not that that’s ever been on Congress’s bingo card.
By all means: Let’s invest in helping the IRS identify tax shelters, offshore havens and deliberate cheats. But let’s also invest in making the experience of filing taxes a little less hellish for Americans who want to follow the law.