The pandemic-era taxpayer experience highlighted gaps in service resulting from chronic underfunding of the Internal Revenue Service — and that underfunding has to be addressed, according to the Electronic Tax Administration Advisory Committee's newest annual report to Congress.
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“COVID restrictions and weather events across the country shuttered or limited operations of processing campuses,” the report reads. “Closed or reduced-force campuses mean that paper processing, whether tax returns or other correspondence, is delayed. The pandemic has taught us that eliminating paper processing, continuous process improvement, and digital solutions are requirements.”
The root cause of problems: chronic underfunding of IRS technology and other tools. “The pandemic underscored the value of electronic filing of tax returns, especially those that the IRS does not consider major returns,” the report adds. “While the IRS budget has decreased over the years, its mission has expanded. The addition of the monthly advance Child Tax Credit option later this summer is just the latest example of how the IRS’s role has grown in recent years.”
ETAAC views the biggest challenge facing the IRS as the lack of appropriate funding, and recommends:
- Restructuring IRS funding to eliminate appropriations categories.
- Funding annual IRS budget requests “predictably and fully.”
- Establishing a pilot benefits-based funding tool that allows the IRS to retain a portion of defined amounts it collects for technology or staffing-related projects.
- Immediately funding the backlog of technology projects described in the IRS Technology Modernization Plan. (“To its credit, the IRS has worked during the pandemic to accelerate access to digital tools, such as e-filing of Form 1040X and third-party authorizations. Much work remains [and] lack of resources — financial and human — is hindering progress.”)
- Ensuring that inapplicable budgetary limitations don’t impact IRS funding.
“Congress must provide authority and funding for needed staffing increases. The IRS must revamp its hiring and training protocols for a successful paperless environment,” the report adds. “Technological advancements alone will not achieve the desired taxpayer experience.”
The Volunteer Income Tax Assistance program, which prepares tax returns for underserved taxpayers, shut down with the rest of the country in March 2020. “Many VITA sites were not equipped to operate virtually, and those that did remain open struggled with increased cleaning costs and difficulty in retaining volunteers,” the report says, adding, “It appears that some of these taxpayers were able to use the IRS’s Free File services.” VITA sites seem to have continued to operate at a lower capacity than before the pandemic, the report adds.
The report also recommended enhancing security without compromising taxpayer access; increasing transparency for taxpayers regarding their returns; and reducing the tax gap.
The ETAAC is a public forum whose 21 members work with the Security Summit to fight tax-related ID theft and cybercrime. ETAAC members represent various segments of the tax community, including individual and business taxpayers, tax professionals and preparers, software developers, payroll service providers, the financial industry and state and local governments.
