The Biden administration used Tax Day to make a renewed push for $80 billion more funding for the IRS, touting its work not only processing tax returns but doling out cash from Covid-19 spending packages.
‘Today’s deadline is an inflection point in what has been the agency’s most challenging filing season in recent history,’ Natasha Sarin, Counselor for Tax Policy and Implementation, wrote in a statement. ‘This is the byproduct of chronic underfunding that has starved the IRS of the tools it needs to serve the American people, coupled with a historic pandemic that introduced new responsibilities alongside mammoth challenges.’
President Biden’s House-passed Build Back Better plan contained $80 billion to beef up IRS enforcement, aimed at upgrading outdated computer systems and to address the tax gap – the $600 billion in taxes that goes unpaid each year, according to the administration.
That plan went by the wayside when key moderate Democrat Sen. Joe Manchin said he could not agree to it, but key lawmakers are in talks with the administration on a smaller, more tailored bill.
The Biden administration used Tax Day to make a renewed push for $80 billion more funding for the IRS, touting its work not only processing tax returns but doling out cash from Covid-19 spending packages
The IRS answered only 29 million of 100 million phone calls in 2019 and says it has failed to collect $600 billion in owed taxes due to a lack of resources
IRS funding has been depleted to 20 percent below its 2010 level, adjusted for inflation, according to the Center for Budget and Policy Priorities. The number of full-time IRS employees has fallen from 94,618 to 73,409.
‘The IRS knew walking into this filing season that it did not have the workforce or technology in place to serve the American people the way they deserve—to pick up the phones when taxpayers call, to help them access all the credits and benefits to which they are entitled, and to ensure that each and every taxpayer receives their refund quickly,’ Sarin said.
The IRS is notoriously hard to reach – in 2019, it received 100 million phone calls and answered 29 million.
Still, Sarin said the IRS has done ‘Herculean’ work, issuing 90 percent of refunds to individual electronic filers within three weeks and sending $1.5 trillion in support to American households over the past two years, including three rounds of stimulus checks.
The agency started this tax season buried in a backlog of more than 20 million returns that it aims to clear by the end of the year, in part by hiring 10,000 new employees.
It is not clear if the Biden administration could get through a bill to bolster IRS funding as Republicans remain opposed. GOP lawmakers have expressed concerns that the additional resources could empower the agency to go after average Americans, especially after proposals like one that would have handed over transaction data on accounts with more than $600 aggregate inflow and outflow.
That proposal, originally part of President Biden’s Build Back Better plan, was raised to a $10,000 threshold after much pushback, and has not yet been acted on by Congress.
But in an executive crackdown earlier this year Biden announced he would require platforms like Venmo, PayPal and Cash App to report transactions if they exceed $600 in one year.
Though businesses were always required to self-report such incomes to the IRS, many often did not keep record of their smaller transactions.
The payment apps were previously required to send users 1099-K forms if their gross income exceeded $20,000 or they had more than 200 transactions per year.
The new tax law was part of the March 2021 American Rescue Plan, which passed with no Republican votes.
IRS audits of the rich have plunged 72 percent from 2012 to 2021, according to a Syracuse University’s Transactional Records Access Clearinghouse (TRAC).
Fewer than two out of every 100 millionaires found themselves subject to an IRS audit in fiscal year 2020, according to the report.
