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The IRS braces for another chaotic tax season

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The IRS braces for another chaotic tax season

WASHINGTON — At the Internal Revenue Service’s giant Kansas City, MO, processing center, teams of clerks earning $15 an hour work through the night, trying to help the agency clean up a backlog of more than 20 million tax returns. which are one year overdue.

Conditions are subpar: Scanners sputter, workers are forced to enter data by hand, staplers are scarce and piles of tax documents flow through carts.

“The general theme for the time I’ve been there has been chaos,” said Sean Gunn, a clerk in the receipts and operations group at the IRS, who began work at the facility in Kansas City last June and went on to become tax. Transitioning. Examiner.

What is happening in Kansas City provides a window into the problems of the IRS, which has been mired in a political and logistical mess that has disappointed taxpayers, angered lawmakers, and President Biden’s economic agenda. A major source of funds is put at risk.

Officials have warned of another rocky tax filing season ahead, saying it could be a “very disappointing tax season for both taxpayers and tax professionals”. Democrats point to this as evidence that the agency needs more money. Mr Biden has called for an investment of $80 billion in the agency over a decade to help crack down on tax fraud, estimating it would increase tax revenue by $400 billion.

But tax-averse Republicans, who have spent years cutting the agency’s budget, have seized on the IRS’ problems as proof it shouldn’t be given more money or responsibility, at least one lawmaker called the tax collector. called for its termination.

Much of the agency’s current woes can be traced back to budget cuts that have destroyed the agency’s ability to function at a critical moment. Staffing shortages and outdated technology have been hit by a pandemic that has kept much of the agency’s workforce at home, while the IRS was turned into an economic relief spigot responsible for churning out checks and other stimulus payments to millions of Americans.

The agency’s workforce of about 75,000 is the same size as it was in 1970. Its enforcement staff has declined by more than 30 percent since 2010, and audits of millionaires have declined by more than 70 percent. And its budget to account for inflation has declined by about 20 percent during the past decade.

At the same time, the tax code has become more Byzantine, and the number of individuals filing tax returns has increased by about 7 percent, according to the Center on Budget and Policy Priorities. The federal government has had to wrestle with well-financed corporations using complex tax avoidance maneuvers and the rise of digital currencies, which have made transactions more opaque and difficult to tax.

“It’s clearly starving,” said John Koskinen, who was IRS commissioner during the Obama and Trump administrations. “Now the chickens are coming home.”

The IRS is now trying to recruit new employees. According to a person familiar with the matter, it recently secured hiring authority for 10,000 positions from the United States Office of Personnel Management as it works to clear a backlog of returnees. Funding for new employees, which will be brought in over two years, comes from the current IRS budget.

The IRS expects to process 160 million 2021 tax returns this year. About 90 percent of those are filed electronically and flow relatively smoothly through its systems. But the nearly 24 million paper tax returns, revised filings and other mail correspondence from previous years continue to clog his strange system and describe him as the “kryptonite” of the National Taxpayer Advocate, an independent watchdog within the IRS.

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Much of that paper flows through Kansas City, the agency’s primary paper processing center. Housed in the city’s old post office building, the center is set up like a giant warehouse, with people working at long tables and in cubicles as shipments of filings are delivered. The machines cut open envelopes which must then be hand-stamped and entered into the IRS’s main database. The method of tracking older filings is reminiscent of the Dewey Decimal System.

At a recent IRS town hall attended by a senior Biden administration official, employees pleaded for new filing boxes, better staplers and more computers.

Mr. Gunn describes himself and his fellow clerks as foot soldiers of tax forms, opening 500 envelopes per day to sort checks, letters and filings, which must be funneled to the right team of tax examiners. . The job is often thankless and hopeless as a result of a lack of resources in the IRS.

“A surprisingly large amount of time has been used in looking for staples to staple carts and files to hold a surprisingly large amount of files,” Mr. Gunn said in an interview.

The IRS has tried to answer some of its challenges. It has redeployed employees to areas of need and tried to adopt new technology. But it has also caused trouble.

A new facial recognition system implemented last year to identify taxpayers trying to access their accounts — the IRS said was intended to address concerns about data security — MPs and activists claimed it was a breach of privacy. After spending $86 million on the project, pressure came under pressure from the IRS to drop the program and develop an alternative in the middle of tax season.

The agency’s problems run rampant across the country, as angry taxpayers experience lengthy delays in getting their refunds and calls to the IRS go unanswered. According to Taxpayer Advocate, of the 282 million calls to the IRS, just 11 percent reached a customer service agent last year.

Adding to the pain: A large proportion of data storage systems that don’t communicate with each other have disabled customer service staff at the IRS, who often can’t determine why tax returns have stalled in the process. .

Jordan Stanger, a student at Upper Iowa State University, filed an amended tax return last spring after he realized he was eligible for a $2,600 tax credit to offset higher education expenses. He still hasn’t received his refund and liaises with the IRS by telephone every 30 days.

Sometimes Mr. Stanger goes through a maze of automatic prompts that eventually go silent. At times they have waited over an hour to reach a representative, only to be told about the backlog facing the agency and to call again in 30 days.

“It’s incredibly disappointing,” said Mr Stanger, 23, who had hoped for a refund towards the down payment on the house. “The reality is it’s my money. They’re always quick to take it, then when I want it back it’s on their time.”

The Biden administration insists that Republicans are to blame for the IRS’s woes and taxpayers’ frustration.

“Over the past decade, the IRS budget has been decimated, resulting in what every American relies on to go hungry,” said Alexandra Lamanna, a spokeswoman for the Treasury Department that oversees the IRS. “Some members of Congress have politicized the issue.” and blocked common-sense advances, such as hiring more people to process tax returns and modernizing technology for partisan ideological reasons. ,

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Legislation that would substantially boost IRS funding has stalled in the Senate, and Republicans have no intention of doing so.

At a hearing in February, Republican Senator Mike Crapo of Idaho argued that IRS funding was generally out of sync with inflation and said the agency’s problems were mostly the result of the pandemic and its inability to update its technology, which led to the communication. It became difficult to do. with taxpayers. He criticized the Biden administration for demanding money to hire an “army of new auditors.”

Some Republicans want to further upset IRS Senator Rick Scott of Florida, proposing to cut the agency’s funding and work force by 50 percent in his new plan to “save America.”

The former IRS commissioner, Mr. Koskinen, argues that efforts to dismantle the IRS provide another opening for tax fraud. He laments that Republicans have led the charge in withholding funding in the name of shrinking the government.

“You’re basically saying that you want to provide the government with less money to work with,” he said.

The decline of the IRS is a deeper problem for the United States economy, says national taxpayer advocate Erin Collins, who argues that a reliable stream of funding and a technology overhaul should be a priority for an agency that is growing as an organ. Playing the role of social welfare.

“It’s an important organization, and it serves a really important mission, not just in tax administration,” Ms. Collins said.

The IRS is trying to iron out some of its problems, but it has been a struggle. In February, it reversed plans to close its processing center in Austin, Texas.

But low pay and stressful working conditions can make it difficult to attract talent, especially when private sector companies such as Amazon can offer more funding.

A report released last month by the Treasury Inspector General for Tax Administration found that the IRS was only able to hire two-thirds of the new employees it was trying to recruit last year. Pay and the lengthy onboarding process were cited for the shortfall in the report. Low morale has also been a problem.

Deirdre Gamil-Hawk left her job as a tax investigation technician in Kansas City in December 2020, less than six months later. She became frustrated that labor shortages consumed her role, which included coding and processing tax forms, opening envelopes and sorting mail. The last straw was when she was taken back to work by her supervisor after her mother died from coronavirus.

“They have good people out there, but they treat them as if they are expendable,” said Ms Gamil-Hawk.

Some IRS employees who are in the midst of this tough tax season feel a sense of guilt about the backlog, which has caused many taxpayers to wait more than a year to get a refund.

“Looking at all these returns from last year, it’s disappointing and disappointing,” said Sean McCullough, a data entry clerk in Kansas City.

Even Mr. McCullough’s aunt has asked if he can do anything about her outstanding refunds for the tax returns she filed last year. He was unable to help.

“I really can’t, because I’m just one person out there,” he said.

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