Treasury officials are warning that the IRS faces a very difficult tax season this year.It could spell delays for tax refunds, particularly for people using paper forms.A top Senate Democrat told Insider he’s not ruling out pushing for an extension.Get a daily selection of our top stories based on your reading preferences.Loading Something is loading.
Treasury officials are warning that it’ll be a difficult process for the under-resourced agency because of historical underfunding.The IRS was already dealing with systemic challenges pre-pandemic, but new demands have worsened them .
That could delay the agency’s ability to get refund checks to Americans, or support taxpayers navigating the filing process.
Many Americans rely on those refund checks as a financial lifeline — and delays could imperil their ability to pay bills.
The IRS has been tasked with distributing several rounds of economic relief throughout the pandemic, including monthly child tax credit checks on top of direct payments last year.The agency is also experiencing backlogs due to the pandemic.
For instance, during the first six months of 2021, the agency had under 15,000 people to manage the over 240 million calls it got.That amounts to one person for every 16,000 calls the IRS received.
And IRS workers — whose staffing levels are the same as in 1970 — are using technology for processing returns that goes back to the 1960’s.
At least one top Senate Democrat isn’t ruling out pushing for Americans to get extra time to file their taxes this year.
“I’m going to look at all of the ideas,” Sen.Ron Wyden of Oregon, the Democrat in charge of the powerful tax-writing Senate Finance Committee, told Insider, adding he’d long been against the drastic cuts to the IRS budget that contributed to the dire situation the agency faces.
Tax refunds can serve as an important financial lifeline for many Americans.A 2019 study from the JP Morgan Chase Institute found that refunds amount to nearly six weeks of take home income for the average family getting a refund.For nearly half of families who get refunds, those refunds are actually greater than the balances they have in their cash accounts.
In the week after those families get refunds, their spending on things like cash withdrawals and bill payments can more than triple.
The IRS’s budget has fallen by over 20% in the last decade, according to the Tax Policy Center , while audits fell by 42% from 2010 to 2017.
The reduced workforce could also mean that the IRS won’t necessarily be able to fully crack down on tax evaders .
The number of agents devoted to working on sophisticated tax evasion enforcement has fallen by 35% over the last decade, according to Treasury .A study from IRS researchers and academics found that the top 1% of Americans fail to report about a quarter of their income to the IRS.
The Biden administration has been funneling support towards the embattled agency, with the American Rescue Plan providing almost $2 billion in additional funding for the IRS.The Build Back Better Act would contain an $80 billion investment in the IRS over the next 10 years; that could bring in an additional $700 billion in revenue through more efficient tax enforcement.For now, though, that legislation is stalled.