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‘A Perfect Storm’: COVID law could send IRS rage into overdrive
With a stroke of the pen Thursday, President Joe Biden ushered in a series of large-scale pandemic relief measures: checks for $ 1,400 or more to individuals and families, a hailed new child tax credit as a revolutionary measure against poverty and a major tax. for millions of people who received unemployment benefits last year. In an instant, however, the $ 1.9 trillion relief bill created an overwhelming amount of work for the government agency charged with making its noble programs a reality: the Internal Revenue Service. and the widely hated tax agency had already struggled to meet its main annual goal – processing tax returns – even before the US bailout was passed. As of Thursday, it sends tax refunds 32% slower than last year, according to the agency’s weekly tax season statistics report. In February, the IRS internal watchdog said only one in 11 calls to the agency were even answered. Now, in the middle of tax filing season, the IRS mission has exploded thanks to to the emergency plan in the event of a pandemic. First, he must send another round of stimulus checks to a large part of the population of the country. Next, the agency must work on the bill’s changes regarding unemployment insurance taxation: with Democrats paying the first $ 10,000 in benefits tax-free, many beneficiaries who have already filed their returns. will want to access this benefit, and the IRS must understand how to facilitate this. On top of that, the agency is tasked with preparing for a radical expansion of the Child Tax Credit, which will now take the form of a monthly payment of $ 300 per child, to help millions of families in weeks and weeks. months to come. of this, of course, is the April 15th filing deadline. Some lawmakers have asked the IRS to extend the filing period like it did last year, but there is no indication yet that will happen. The IRS did not immediately respond to a request for comment. Among tax policy experts and lawmakers who keep a close watch on the IRS, these growing duties and the tight deadline are creating serious anxiety. “I would never say never when it comes to the IRS and its ability to implement new legislation, new challenges, but, boy, it’s going to be tough,” said Janet Holtzblatt, senior fellow at Urban-Brookings Tax Policy Center. “There will likely be SNAFUs along the way.” A tax lobbyist put it another way to the Daily Beast: “It’s a perfect storm.” Supporters of the back-up plan are in the somewhat awkward position of defending the bill’s ambitious agendas while acknowledging the pressure those same agendas are putting on the agency that’s supposed to make it all work. “It is quite predictable that we are going to be challenged to move forward, to implement this bill which is desperately needed,” said Rep. Gerry Connolly (D-VA), who chairs a subgroup of the House Oversight Committee with jurisdiction over the IRS. “We are asking the IRS, which is a tax collection and audit agency, to also become a benefit payment agency. It’s a big change. It’s all a mission creep. Postmaster General Predicts More Mail Delays, Price Hikes Few people expect the IRS to crash and burn out in the coming months or become unable to meet its demands. key functions. But the widespread suspicion is that it will simply progress more slowly and the quality of service to taxpayers will decline. “What’s going to happen is that the IRS is good at doing whatever is the priority right now that needs to be done. Said Charles Rossotti, former IRS commissioner under Presidents Bill Clinton and George W. Bush. on a long term basis even worse. Experts fear the agency is backing down in fulfilling its core compliance mission – ensuring that people who owe taxes pay them – than it previously was. IRS Commissioner Charles Rettig told lawmakers in February that the agency failed to collect some $ 570 billion in taxes owed in 2019. A study conducted the same year by the National Bureau of Economic Research revealed that the so-called “tax gap” could reach 7.5 dollars. Democrats blame Republican cuts to the IRS budget for this sad state of affairs. “Republicans have spent the last decade gutting the IRS, so the agency has struggled with enforcement and staffing,” said Sen. Ron Wyden (D-OR), chair of the Committee on Senate finances, which oversees the IRS. took a House majority in 2010, Tea Party Republicans all but reveled in the IRS cut to the budget, which they saw as emblematic of wasted government spending. The emergence of the Affordable Care Act – a program the IRS essentially enforced because of the centrality of the law’s penalty tax for not having health insurance – made it even more of a GOP target. . by 20%, said Holtzblatt, and its workforce has been reduced by almost a quarter since 2010. Modernization efforts are behind schedule: the agency relies on technological systems that have been introduced into the administration John F. Kennedy. Even before the pandemic, these factors contributed to the delays in reimbursement; President Donald Trump, whose first budget request called for a $ 250 billion reduction in the IRS, finally gave in, asking for more money for tax enforcement in 2019. Last year in the middle of tax filing season, the IRS had to process the returns. and refunds while figuring out how to issue the first round of stimulus checks – 170 million of them – included in the CARES Act. This effort was largely successful, but there were delays: As of October, 12 million Americans still had not received their checks. And as of December, the IRS still had 1 million tax returns to process as of 2019, well after the July 15 filing deadline was extended. Capitol Hill’s outrage was so widespread that the special hotlines that the IRS had put in place to handle complaints from lawmakers were totally outdated. Rettig told Connolly’s committee in October: “We had a phone line for Congress that was basically overwhelmed by volume…. and then it was my brilliant idea to create an e-mail box so that our employees could work on it 24 hours a day on the e-mails received, ”said Rettig. “We have received, I think, over a hundred thousand emails from house.gov or senate.gov [email account]. And so my brilliant idea really took hold of us too. But it was an effort to try to get there. For Rep. Bill Pascrell (D-NJ), who chairs the House Ways and Means subcommittee that oversees the IRS, the agency’s situation is remarkably similar to that of another public institution suffering from structural problems exacerbated by the pandemic: the US Postal Service. “It’s not like the IRS is using a well-tuned machine here,” Pascrell told The Daily Beast. “The IRS reminds me of the post office and how it’s run.” Now that they control the White House and both houses of Congress, Democrats are optimistic they can do more to pull the IRS out of the hole with increased funding. The last year of the Trump administration has even seen improvements; The IRS’s fiscal year 2021 budget increased by $ 409 million from 2020, for a total funding allocation of nearly $ 12 billion. In his statement to the Daily Beast, Wyden noted that the plan US bailout includes $ 2 billion to help the IRS implement various programs. “We can’t ask the IRS to do more and more and not provide adequate resources,” he said, adding that “the solution here is not one-time funding.” “It’s much more difficult for the IRS to build the aircraft in flight. that, ”Wyden continued. “We need sustained, long-term funding for the IRS to build and maintain these systems for the long term.” In the short term, experts are confident that the IRS will issue the next round of stimulus payments quickly, after having had two.But the duty to help eligible taxpayers access major tax relief on their old unemployment benefits may be delicate. Many will have to change the tax returns they’ve already filed, and the IRS will have to figure out how to help them do that quickly and accurately. “I have been hoping since last Friday, when this was announced, that IRS and Treasury lawyers have been working around the clock to guide taxpayers on what to do,” Holtzblatt said. “It’s not easier for the IRS if taxpayers are confused.” Many tax experts, like Holtzblatt, say it’s highly unusual for the government to change tax laws retroactively so late in the filing season. Despite all the converging challenges and the promise of delays, it’s not clear whether the IRS will extend the deadline for filing tax returns, like they did last year. “It’s a no-brainer for me,” Pascrell said. “Passing massive stimulus measures this week is a huge victory for America, but is part of the [IRS] The responsibility, as well as that of the administration, is to follow and understand the consequences of what we have promulgated. Rossotti, the former IRS commissioner, told the Daily Beast that the IRS has taken the position that an extension is “not a good idea.” “It doesn’t make it any easier to change the depot season,” he said. “Any taxpayer can get an extension … There’s a whole system of a set of dates, it affects a lot of things.” Whichever way you go, it won’t be easy for the IRS. Rettig is set to testify before the House Ways and Means Committee next week, and Pascrell said he had “better” answers on how they plan to maintain adequate service to taxpayers. His colleague, Connolly, wasn’t quite ready to blame himself. Congress for the situation. But he offered a reflection: Legislative bodies like Congress, he said, “often don’t pay attention to implementation and delivery. They believe that when they passed the bill they solved the problem. For more, check out The Daily Beast. Get our best items delivered to your inbox every day. Register now! 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