IRS faces criticism despite billions in funding, as federal watchdog report highlights delays and challenges.
Despite getting billions of dollars in extra funding to help meet its pledge to provide taxpayers with “top-quality service,” the IRS is failing to measure up to expectations in a number of areas, including taxpayer identity theft and amended tax return processing, a watchdog says.
Erin Collins, the national taxpayer advocate at the Taxpayer Advocate Service, released her 2023 Annual Report to Congress on Wednesday, on balance giving the IRS a passing grade.
“Overall, the magnitude of successes exceeded the areas of weakness in 2023,” Ms. Collins wrote in the report’s preface.
The watchdog gave the IRS plenty of bad marks, however, including for things like “unconscionable” delays in providing support to victims of tax-related identity theft or ongoing processing delays that “burden and frustrate” taxpayers.
“The year 2023 was one of extraordinary transition for the IRS and therefore for taxpayers,” Ms. Collins wrote.
She added that the “despair” of the past three years since the outbreak of the pandemic (when the IRS shut its offices and stopped processing paper-filed tax returns and correspondence) have given way to “cautious optimism” as the IRS managed to make some improvements.
The two most important IRS improvements in 2023 were answering a much higher percentage of taxpayer telephone calls and eliminating the backlog of paper-filed 1040 tax forms.
Despite these improvements, however, the watchdog noted that “challenges remain.”
Processing Challenges and Funding Boost
The Inflation Reduction Act that President Joe Biden signed into law in 2022 initially included around $80 billion to expand the IRS’ budget over ten years.
This drew the ire of Republicans, who argued that much of that money would go to hiring an “army” of tax enforcers who would reach for low-hanging fruit and target ordinary Americans rather than wealthier, more financially sophisticated taxpayers who are trickier to audit.
The watchdog acknowledged in the report that some of the additional funding—specifically the part allocated to the IRS enforcement arm—has been “controversial.”
By Tom Ozimek
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