A "start-stop" approach to congressional funding of the IRS has starved the agency of sustained, long-term investment needed to upgrade its technology systems, and this has contributed to ongoing delays in tax return processing, IRS Commissioner Chuck Rettig told lawmakers.
Having information technology dating back to the 1960s and '70s has meant that his agency must rely on paper-based processes, Rettig testified at an April 21 hearing of the House of Representatives Oversight and Reform subcommittee on government operations. The use of paper processes has exacerbated delays in the IRS's efforts to surmount a backlog of current- and prior-year returns as well as correspondence with taxpayers, millions of whom have been unable to learn the status of their refunds and other matters.
The IRS, along with other parts of the U.S. government, has endured more than 100 continuing resolutions, Congress' method of short-term government funding since 2001, Rettig pointed out to the subcommittee.
He further explained that the IRS received its omnibus budget on March 15, leaving just six months in the current federal fiscal year for the agency to use those IT funds.
Also testifying at the subcommittee hearing was National Taxpayer Advocate Erin Collins, who said taxpayers in 2022 are experiencing many of the same challenges the faced last year: delays in processing returns and correspondence with the IRS and difficulty reaching the IRS by phone. Collins added that new digital tools implemented by the IRS for tracking refunds and amended returns have been unable to give taxpayers the information they seek.
It received almost 170 million individual income tax returns last year, about 10% of which were filed on paper forms, she pointed out.
"Last year, the IRS received about 17 million original paper individual returns, and those processing delays are now running up to 12 months," the taxpayer advocate testified.
Over the past two years, the IRS's backlog of unprocessed returns and pending correspondence "has snowballed," she said. "The IRS needs to get current on the inventory and get out of the hole it finds itself in."
In 2021, Collins said, only 32 million of 282 million calls from taxpayers were answered by an IRS employee or contractor.
Members of subcommittee took to partisan bickering at the hearing over whether ensuring multiyear funding for the IRS, a request repeatedly made by Rettig and his predecessors would solve the agency's problems with outdated technology and difficulty meeting taxpayer needs. Democrats on the subcommittee, led by its chairman, Rep. Gerry Connolly (D-VA), agreed that the agency requires more funding and blamed its woes on chronic cuts by past Republican majorities in the House and Senate.
Rep. Jody Hice of Georgia, the ranking Republican on the subcommittee, questioned why earlier efforts to modernize the IRS hadn't yielded better results. He pressed Rettig to explain how additional funding from Congress would improve the agency's systems.
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