Anyone waiting on a delayed tax refund from the IRS may not want to look to Congress for a speedy solution.
A House Oversight and Reform subcommittee hearing Thursday laid bare the partisan divide over whether a funding boost would fix a beleaguered tax agency suffering from staffing shortfalls and outdated technology.
Government Operations Subcommittee Chairman Gerald E. Connolly, D-Va., said it was time to reverse “decades of starvation of the IRS by the Congress” that he said has hamstrung the timely processing of tax returns. “And today, as we head into this year’s tax season, the IRS often finds itself gasping for air,” Connelly said in opening the hearing.
President Joe Biden has proposed spending $80 billion over a decade to boost IRS hiring, procure new technology and close the gap between taxes that are owed and what’s actually collected. The increased revenue from that effort would reduce deficits by $127 billion through 2031, Connolly said.
But Republicans made clear they would not support a major funding boost without greater scrutiny of the IRS. They said the agency suffers from poor management on technology projects and can’t always be trusted to protect confidential tax information, citing the leak of tax documents last year to ProPublica, which disclosed taxes paid by some of the country’s wealthiest filers.
“Republicans are not willing to simply give the IRS more money on a long-term basis without any accountability,” said Georgia Rep. Jody B. Hice, the panel’s ranking member. Hice said the proposed $80 billion would be mostly mandatory spending that escapes the annual appropriations process, thereby reducing congressional oversight.
“We will never see how that money is going to be spent,” he said.
While they differ over solutions, both sides agree the IRS needs a fix. Years of cuts have led to staffing shortfalls that translate into a backlog in the processing of returns. Paper returns can take eight months to process, National Taxpayer Advocate Erin M. Collins said in her annual report to Congress.
Meanwhile, phone calls to the IRS go largely unanswered. In fiscal 2021, customer service representatives could field only 11 percent of the 282 million phone calls they received.
“There is no way to sugarcoat the year 2021 in tax administration,” Collins said in her report. “From the perspective of tens of millions of taxpayers, it was horrendous.”
At the hearing, Collins said Congress should address the “unprecedented imbalance between the IRS’s workload and the resources it has available to do the work.”
She said her office for years has recommended funding to scan paper returns electronically, so far to no avail. “Those refunds are going to continue to be delayed for many months to come,” she said.
IRS Commissioner Charles P. Rettig acknowledged his agency’s shortcomings, saying it has been hamstrung by staffing shortfalls even as its workload grew with the need to distribute pandemic relief, including tax rebate checks.
“We are in a very difficult situation,” Rettig told the panel, while adding that "currently we're trending in a good direction."
He said the agency typically fails to collect between $300 billion and $400 billion each year in taxes that are owed. Tax audits of millionaires have declined by about two-thirds since 2012, he said. “Staffing is a real issue here,” he said.
But Rettig promised to work with Congress closely to address any concerns. He said he has given his personal cell phone number to most members of Congress and would make it available to any lawmaker who wanted it.
“We want to get this right,” he told the panel. “Where we need to change, we will change.”