While tax season is never particularly amusing, for many taxpayers, this year’s filing season could be the filing season from hell.
Don’t take my word for it. These are warnings from Treasury officials in the United States, who are attempting to prepare the public for refund delays, service outages, lengthy phone hold purgatory, and other annoyances that taxpayers will suffer in the coming months.
Get Ready for a Tax Season from Hell
This (second straight) tax season may leave more than just today’s taxpayers fuming. It might also jeopardise the government’s capacity to fund itself in the long run.
The IRS has had issues for a long time. The funding for the agency has been slashed by about 20% in inflation-adjusted figures since 2010.
The population of the United States has increased during that time. In addition, the tax code has become more complicated. (To be clear, Congress is to blame, not the IRS.)
Furthermore, Congress has piled on new obligations to this beleaguered agency, including those connected to Obamacare and the Foreign Account Tax Compliance Act.
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Then there was covid-19.
In 2020, the agency’s mail centres were closed for months. Illness forced the company to lay off a large portion of its customer service staff.
Remote employees tried to figure out how to deal with paper-based caseloads.
In the midst of it all, Congress ordered the IRS to create brand-new safety-net programmes from the ground up, frequently remotely, with 1960s-era technology and no advance planning.
The agency first gave multiple rounds of stimulus payments to most American households, followed by a monthly child stipend to nearly every kid’s parents or guardians in the United States.
Under the circumstances, the agency performed well in its new emergency tasks. Even heroically. However, the company’s notoriously bad customer service got even worse.
According to the national taxpayer advocate’s recent report to Congress, 282 million taxpayers attempted to contact the IRS for help in fiscal 2021, but only approximately 11 percent of them (32 million) contacted an IRS staffer. (On the prior year’s call, only 24% of callers were connected.)
Many people were desperate to speak to someone, anybody, since they had issues about how to follow the law in light of the tax code modifications made during the pandemic.
Others were keen to find out what was preventing them from receiving their refunds.
The IRS, for example, sent over 14 million warnings to individuals in 2021, stating that the agency had discovered a “math problem” on their return.
The majority of these “mistakes” were linked to claims for (legitimately perplexing) unpaid stimulus money. This put refunds at jeopardy, sometimes for months, until the issue was remedied.
Backlogs grew, putting the agency in a bad position for the forthcoming filing season.
Normally, the IRS has roughly 1 million backlogged paperwork at the start of the tax season; this year, Treasury officials estimate they have “several times” that amount.
Recent modifications to the child tax credit are likely to add to the confusion, both because the credit was partially paid out in advance last year and because many people who have never had to file taxes before will most certainly do so this year because they’ve become newly eligible for the credit.
There will be lots of opportunities for more “math” and clerical errors as a result of these policy changes and tax-filing rookies.
And, very likely, considerably longer processing times. And it’s just going to get worse for honest taxpayers.
The Biden administration has made a big deal out of its requests for extra auditing and enforcement monies, which the IRS desperately needs.
However, the string of mishaps suggests that it also requires a significant increase in funding for customer support.
According to a Treasury official, the IRS received $2 billion from last year’s stimulus package, which it has utilised in part to expand customer support.
These aggravating filing seasons pose a long-term threat. Taxpayers who have always been law-abiding and compliant may become less law-abiding and more noncompliant.
When people can’t receive answers to fundamental queries — or even get someone to pick up the phone! — they may give up attempting to figure out the appropriate solution. They can try to save money by cutting corners.
They may even knowingly underpay Uncle Sam, especially if they perceive their wealthier neighbours are already shirking.
“You’re going to have more enforcement difficulties down the line if you don’t start paying attention to the concerns of the majority of taxpayers,” says Nina E. Olson, the former national taxpayer advocate who now directs the Center for Taxpayer Rights.
She points out that paying for more customer service staff up front may avoid the eventual requirement for more expensive, specialised auditing officials.
Of sure, simplifying the tax law would help a lot. Not that Congress has ever had that on its bingo card.
By all means, let’s contribute to the IRS’s efforts to uncover tax havens, offshore havens, and purposeful cheats.
But let’s also invest in making the process of filing taxes for Americans who wish to follow the law a little less painful.