C-SPAN Washington Journal this morning hosted Nina Olson, former National Taxpayer Advocate inside the IRS between 2001 and 2019, and current head of the Center for Taxpayer Rights. Olson’s former watchdog job – inside the IRS but not reporting to the IRS Commissioner – gives her an insider perspective and unique insight into the IRS’s current challenges. Some highlights from her interview:
The IRS is entering the filing season far behind. With the tax filing season about to start on January 24, the IRS still has (as of December 31) six million unprocessed individual returns from tax year 2020. Amended returns are taking 20 weeks to process, and victims of identity theft are waiting an average of 260 days for a response. Every point where IRS processes require manual review, such as with processing of an amended return, creates a chokepoint.
Last year the IRS issued 13 million "math error" notices, sending a letter automatically adjusting the return, up from 700,000 in 2020. Taxpayers can either accept the change or call a number to dispute it, but the percentage of calls being answered is only between 9 and 19 percent. Many of these are likely reconciling eligibility for economic impact payments, and the same issue may occur this year with reconciling eligibility for advance child tax credit payments. The IRS is mailing letters summarizing child tax credit payments to taxpayers by the end of January.
Would the proposed Build Back Better (BBB) bill’s provision to expand IRS funding include money to resolve these issues? “Not a lot. That’s what’s disturbing to me.” Olson says BBB’s authors think added enforcement personnel results in increased collection but don’t think there’s as much value from added taxpayer service personnel. “As we’ve seen, if you eliminate taxpayer service, then the taxpayers who are trying to comply with the law are basically screwed and aren’t able to get the assistance they need.”
Olson disagrees with the decision by the Taxpayer Advocate Service to stop assisting taxpayers whose main issue is IRS processing delays because the IRS cannot handle any referrals to fix problems. “I personally disagree with that. I think there’s a lot of reason for taking those cases in and then issuing Taxpayer Assistance Orders if only to quantify the size and damage and extent of harm that is happening to taxpayers in the United States because the IRS systems are not working.”
If you get a collection notice after sending in an explanation or paying the amount they demanded, don’t ignore that. The issue may be that IRS systems have not yet associated what you sent in with your file because it’s sitting somewhere unprocessed. “Take a book to read and try to sit on the phone to get through to the IRS. You may get what they call a courtesy disconnect (“Sometimes it’s the system that disconnects and you don’t even get a message. Sometimes you get a ‘hello, we’re going to disconnect now,’ and that’s the courtesy disconnect.”). But try to reach out with your information and see if they can locate it.” Olson also recommended calling to ask for a 60-day hold on collection, involving your local Taxpayer Advocate Service office because this is a dispute about amounts owed more than a processing delay, and involving your member of Congress since they have constituent service staff.
The IRS has instituted a “call back” feature under congressional pressure, whereby rather than waiting on hold taxpayers can schedule a call back without losing their place in line. But Olson says the IRS has trouble turning on that feature because they aren’t assigning enough warm bodies to return the phone calls. The IRS had over 200 million phone calls in 2021, double the previous year.
In short, the IRS sends out letters and requires taxpayers to resolve issues by paper or phone, but is months behind in processing the papers and mostly is not answering the phone. Call volume is up in part because if you do manage to reach someone by phone, they often cannot help you since they haven’t processed the paper and they’re spending time on the phone telling that to taxpayer after taxpayer. The IRS blames funding but it has also placed institutional barriers in the way of electronic filing, has resisted online accounts where taxpayers could upload documents and view all account activity, and has not prioritized digital communication tools such as secure email, authenticated text chats, face-to-face videoconferencing, self-service kiosks, and other tools that may provide better service at equal or less cost than the status quo.
For more on this topic, my colleague Brandon discussed the upcoming filing season, and NTU is urging real reforms to the IRS as a top congressional priority for 2022.