Underfunded IRS struggles to send refunds, answer calls
Last year was another tough year for the IRS, according to a new federal report.
Burdened with years of budget cuts and a recent increase in workload to implement a new tax law, the IRS struggled to deliver on its mission in the past fiscal year. The annual report from the Office of Taxpayer Advocate found that in the 2019 fiscal year, among other problems, the IRS was late in sending legitimate refunds to many taxpayers and failed to answer the majority of phone calls from taxpayers. The agency also failed to collect billions in unpaid taxes.
The Taxpayer Advocate’s role — while inside the IRS — is to ensure sure taxpayer rights are being fairly represented. Among those duties is an annual report to Congress, which lists the most serious problems facing taxpayers. The report is often critical of the agency, and this year’s edition released Wednesday was no exception
The report found the IRS is one of the lowest performing federal agencies in terms of customer service. The agency answered only 29 percent of the 100 million telephone calls it got during the 2019 fiscal year.
That’s a problem not just for those wanting help filing taxes, but also those with more serious issues. People facing enforcement action — such as wage garnishment, bank levies or more — were not always able to reach the IRS to make them aware of hardships, which could potentially free them from those levies.
The IRS has increased the online tools and assistance it provides to taxpayers. At the same time, other forms of live support have dwindled.
The primary problem is that IRS has been struggling with a massive funding shortage and an increased workload. Its budget has been reduced by about 20% since 2010, after adjusting for inflation. And the number of full-time employees has declined by about 22% during that time. Meanwhile it had to manage a sweeping overhaul of federal tax law.
“The biggest issue the IRS faces is on the resources, being just underfunded for a long time. That shows up in customer service audits, the IT system is way out of date,” said Mark Mazur, director of the nonpartisan Tax Policy Center.
While the advocates office said the budget problem is at the core of the agency’s shortcomings, it also noted some could be attributed to “a culture in which the agency focuses on its own priorities without adequately factoring in the needs of taxpayers.”
For example, the report said that the IRS also is struggling to enforce the law “with fairness to all.” Case in point, the IRS has been unable to collect an annual average of about $381 billion in unpaid taxes between the 2011 and 2013 period. This suggests each U.S. household is effectively paying $3,000 to subsidize noncompliance by others.
Additionally, many taxpayers who file legitimate returns waited weeks or months for a refund in the past year because of a new fraud filter. The new filter flagged and stopped the processing of nearly 1.1 million returns. But ultimately, its false positive rate was 71 percent; meaning that 71 out of every 100 refunds stopped were eventually determined to be legitimate.