By Alan Rappeport
The IRS warned taxpayers and lawmakers earlier this week that the 2021 tax season could be a messy and frustrating experience, with a backlog of tax filings and a lack of staff potentially resulting in unanswered phone calls and delayed refunds.
The 2021 tax season, which kicked off Monday, is a critical one for the Biden administration. Inflation is high, the pandemic continues to keep some workers sidelined and fiscal stimulus has run its course. That has made tax refunds even more important for some families than in normal years.
The IRS, which has seen its budget steadily slashed by Republican lawmakers over the past several years, had been struggling to keep up with its workload even before the pandemic hit. President Joe Biden proposed investing $80 billion in the IRS over the next decade, but Democrats have so far failed to pass legislation that would approve such spending, and the agency has warned it will struggle as 160 million tax returns are filed in the coming weeks.
“This could be a very frustrating tax season for both taxpayers and tax professionals,” Charles P. Rettig, the IRS commissioner, told reporters Monday. “For too long the IRS has suffered too few resources to give the American people the service that they deserve.”
A problematic tax season is the latest obstacle for the Biden administration, which is also grappling with rising prices, clogged supply chains, a stalled economic agenda and the possibility that Russia will invade Ukraine. The tax issues could further dent Biden’s poll numbers before the 2022 midterm elections.
Rettig warned lawmakers Monday about the difficulties facing the IRS in a meeting with members of the House Ways and Means Committee, according to a person familiar with the meeting. Joined by Wally Adeyemo, the deputy Treasury secretary, and other Treasury and IRS officials, Rettig said the agency was working to ensure that families would get the remainder of their child tax credit payments in a timely way. He said he was also trying to get the backlog of unprocessed tax returns back to normal levels by the end of the year.
The national taxpayer advocate said in a report this month that the IRS was facing a backlog of at least 10 million unprocessed returns from last year. Since 2010, the IRS’ staffing is down 17%, according to the report. Its workload, measured by the number of individual returns, is up 19% from 2010 — to 169 million returns last year, from 142 million.
Refunds associated with some of those unprocessed 2020 returns have also been delayed, and Retting told reporters Monday that the IRS was taking an “all hands on deck” approach to work through the backlog as quickly as possible.
Republicans seized on the dysfunction at the IRS, arguing that Democrats want to invest in ramping up enforcement at the agency rather than customer service.
“Although the IRS is facing a historically long backlog of tax filings, President Biden and congressional Democrats have failed to allocate even a dime to help taxpayers this tax filing season,” said Rep. Kevin Brady of Texas, the top Republican on the House Ways and Means Committee. “The painful backlog and customer service failures at the agency have become yet another crisis for hardworking American taxpayers.”
The agency’s already thin resources have been stretched by the demands of distributing funds related to pandemic relief programs such as economic impact payments and the child tax credits.
These programs will also add to complications for taxpayers. The IRS said Monday that taxpayers would need to take extra care when filing their returns to make sure that they correctly conveyed the amounts that they had received. Adding to the confusion, some recipients of the child tax credit have received letters from the IRS with the incorrect totals. IRS officials acknowledged that the agency had received questions about discrepancies and urged taxpayers to cross-check their letters with their IRS accounts online.
Tax Day is April 18 this year, and Rettig urged taxpayers to file online and to supply direct deposit information to receive refunds as promptly as possible. He suggested that taxpayers use the agency’s online resources to answer their questions because the agency does not have enough staff to reliably answer the telephones.
“Understand that we are trying, and our employees are trying,” Rettig said.