Explanation: Hindered IRS Tax Agency May Need Months To Get Americans Money


WASHINGTON (Reuters) – In order to put recession-fighting checks in the hands of millions of Americans, the U.S. government will rely on a tax agency that has fewer workers, a smaller budget, and the same computer systems as 1960s that he had the last time he was asked to do so.

FILE PHOTO: A general view of the Internal Revenue Service (IRS) building in Washington on May 27, 2015. Cybercriminals have illegally accessed the tax return information of approximately 100,000 US taxpayers in the past four months said U.S. IRS Commissioner John Koskinen. Tuesday, the latest in a series of data thefts that have alarmed American consumers. REUTERS / Jonathan Ernst / File photo

Hollowed out by budget cuts and hampered by outdated technology, the U.S. Internal Revenue Service has struggled for the past decade. Audits fell and taxpayer service suffered, according to agency figures.

Now Congress and the Trump administration are piling up more work as they scramble to contain the fallout from the coronavirus, which threatens to plunge the world’s largest economy into recession.

The US Senate on Wednesday approved a massive stimulus bill that would provide payments of up to $ 1,200 to millions of Americans. It also includes a range of tax breaks for businesses and individuals. The House of Representatives is expected to adopt it on Friday.

Treasury Secretary Steven Mnuchin has said he wants the payments to be made in early April.

Experts say it will likely be a matter of months, not weeks, before these payments arrive. They say the wave of activity could hamper the IRS’s ability to carry out its other routine tasks.

“It’s the only agency that can do this kind of thing well. But that’s at the expense of everything he’s supposed to do, ”said Nina E. Olson, who was the IRS’s national taxpayer lawyer from 2001 to 2019.

Besides direct payments, the IRS will also have to oversee a new range of tax breaks for businesses and individuals included in the bill. The agency is also to implement a different set of business tax credits that President Donald Trump enacted last week to provide paid sick leave benefits to workers.

Mnuchin last week extended the tax filing deadline for U.S. businesses and households to July 15 from April 15.

Economists claim that out-of-pocket payments are one of the most efficient ways to generate economic activity because the people who get the money tend to spend it quickly.

In 2001, the IRS took over six weeks to issue the first rebates authorized by President George W. Bush’s tax cut. In 2008, the IRS issued its first payments to fight the Great Recession almost three months after Bush signed them.

Since then, the agency has undergone a decade of austerity. Its budget is now 20% smaller after adjusting for inflation than it was in fiscal 2010, according to the attorney’s office. The workforce was also down 20% to 73,550 employees.

The IRS has struggled to find employees who can work with the COBOL language that underpins a computer system first implemented in 1968, according to the Government Accountability Office.

Now he must figure out how to staff his treatment centers at a time when local authorities are urging people to stay home. On its website, the IRS asks taxpayers not to call its hotlines to ask questions about direct payments.

The agency said last week it was closing its more than 300 in-person assistance centers, but would continue to process tax returns and assist taxpayers “to the extent possible.”

“I don’t think any of the policymakers have thought about the practical implications of such an action. The IRS doesn’t have the resources to do it, ”said Howard Gleckman, senior analyst at the Tax Policy Center at the Urban Institute.

Before the IRS makes the payments, agents will need to calculate the amount based on income and marital status, and may not have up-to-date banking information for direct deposits or current addresses to send in. physical checks.

They will, however, be helped by the fact that 89% of deposits were made electronically in 2018, up from 58% in 2008.

Ultimately, the IRS will take the money out, said Charles O. Rossotti, who ran the agency between 1997 and 2002.

“They won’t do it as fast as the politicians want, and they won’t get it perfect,” he said. “But if they want to send $ 500 billion to 100 million people, they will.”

Reporting by Andy Sullivan; Editing by Heather Timmons, Daniel Wallis and Dan Grebler


Esther L. Steinbach

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