Watchdog sees ‘light at the end of the tunnel’ for the IRS

FILE - The exterior of the Internal Revenue Service (IRS) building in Washington, on March 22, 2013. With an $80 billion infusion of funds through Democrats' flagship climate and health law, and a direct hiring authority that has helped rebuild its ranks, the IRS is beginning to see a "light at the end of the tunnel" of its customer service struggles, says the National Taxpayer Advocate. (AP Photo/Susan Walsh, File)
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By FATIMA HUSSEIN

Associated Press

WASHINGTON (AP) — The IRS is beginning to see “a light at the end of the tunnel” of its customer service struggles, thanks to tens of billions of new money from the Democrats’ climate and health law and the authority to hire more people, according to an independent watchdog within the agency.

But that upbeat assessment from the National Taxpayer Advocate is tempered by an early move by the new House Republican majority to rescind nearly $71 billion that Congress had provided the IRS, even though the bill approved Monday is unlikely to advance in the Democratic-run Senate.

In the report Wednesday to Congress from Erin M. Collins, who leads the office assigned to protect taxpayers’ rights under the Taxpayer Bill of Rights, cited “more misery” for taxpayers last year and spoke of the challenges still ahead. “I am just not sure how much further we need to travel before we see sunlight,” she said.

The report outlines how the 2022 tax filing season was a continuation of the yearslong struggle to process paper and electronic tax forms, answer taxpayer phone calls and distribute tax refunds in a timely manner.

The IRS was more successful in chipping away at its mountain of unprocessed returns. The agency began 2022 with a backlog of 4.7 million individual returns and 3.6 million amended returns. By mid-December 2022, the tax collector reduced that backlog to 1 million individual returns and 1.5 million amended returns.

By Dec. 23, the IRS had further reduced its unprocessed backlog of individual returns to about 400,000.

“Taxpayers and tax professionals experienced more misery in 2022,” the report said. “The good news is that since the close of the 2022 filing season, the IRS has made considerable progress in reducing the volume of unprocessed returns and correspondence.”

One reason for the optimism is the infusion of billions from the Democratic-powered legislation signed into law this summer. It is meant to help rebuild an agency that hadn’t seen additional funding in decades. House Republicans, however, want to rescind the money, saying it would bankroll an army of 87,000 auditors who will harass middle-class taxpayers rather than help them — claims that are generally alarmist and misleading.

Another boon to the agency is that IRS officials used direct hiring authority to most recently add 5,000 customer service representatives who were trained in taxpayer rights and technical account management issues.

“We have been unable to provide the help that IRS employees want to give and that the nation’s taxpayers deserve,” then-Commissioner Chuck Rettig said at the time of the October hiring announcement, “but help is on the way for taxpayers.”

Shortly after the new money was secured, Treasury Secretary Janet Yellen directed the IRS to develop a plan within six months outlining how the tax agency would overhaul its technology, customer service and hiring processes.

That report is due in the coming weeks.

Looking forward to the 2023 filing season, Collins’ report said the IRS will be starting “in much better shape than the last two years.”

Deputy Treasury Secretary Wally Adeyemo said in a statement that the additional resources “will enable the IRS to provide better service this filing season so taxpayers can get issues resolved and phone calls answered” so they have the information “they need to file an accurate return.”