Internal Revenue Service overwhelmed with tax returns

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While the number of tax returns filed has increased by more than 13% since 2010, IRS funding has decreased by 20% over the same period.

While the number of tax returns filed has increased by more than 13% since 2010, IRS funding has decreased by 20% over the same period.

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Taxpayers “love to hate” the Internal Revenue Service, but starving it to death is bad for the country.

The Biden administration’s Build Back Better legislation, which includes much-needed funding for the IRS, is now in limbo. President Biden has promised to craft a streamlined bill that could pass Congress. It is imperative that this funding be approved. Otherwise, the IRS’ ability to do its job could come to a halt.

IRS funding is down 20% since 2010 alone, while tax filings are up more than 13%. Meanwhile, the tax code is getting more complex every year; experienced IRS staff are retiring and not being replaced; and COVID-related burdens — sending millions in stimulus payments and monthly childcare allowances, for example — have pushed the IRS to breaking point.

There are several reasons why an underfunded and understaffed IRS is hurting the country. First, today’s IRS, which already handles a backlog of millions of unprocessed returns and taxpayer correspondence, received 280 million calls in 2021, of which only 11% were answered. Taxpayers need and deserve better customer service than this, especially when it comes to properly filing their tax returns.

Second, IRS studies have documented rampant tax evasion. The so-called “tax gap,” the difference between taxes that are legally due but not paid, is around $600 billion a year and growing. Over 10 years, the cumulative “tax gap” will reach a staggering $7 trillion.

Much of this tax evasion occurs with high-income taxpayers, typically businesses organized as partnerships or sole proprietorships, where there is no “third party” reporting earned income. This does not happen with low or middle income taxpayers who earn wages and perhaps interest, dividends and even capital gains on securities transactions, all of which are reported to the IRS and properly taxed.

Thus, cheating contributes significantly to income and wealth inequality, resulting in an unfair tax system that places an excessive burden on low-income taxpayers.

Only an IRS with a full complement of highly trained revenue officers and equipped with 21st century technology, including artificial intelligence, could possibly begin to reduce the “tax gap”, thus easing the pressure on the federal budget and the national debt. A wealth of information on the “tax gap,” including detailed analyzes of its derivation and steps to take over time to narrow it, can be found at shrinkthetaxgap.com, a website run by two former commissioners. of the IRS, a tax attorney, and a former assistant director of information for the IRS.

Finally, an IRS that is adequately staffed and resourced would help restore trust in government. Numerous studies have shown that a growing share of Americans have lost faith in the government’s ability to solve everyday problems. For most people, the IRS looms large. Responsible for collecting all the revenue needed to fund the government, the IRS is the most important, and often the only, agency the typical person has to interact with on a yearly basis.

An IRS that provides thorough, timely, and professional assistance to taxpayers and at the same time increases revenue by reducing fraud by high-income taxpayers, would contribute enormously to trust in government.

In addition to improving customer service, adequate funding for the IRS will generate significant revenue for a range of national spending priorities. Congress’ official marker, the Congressional Budget Office, has determined that funding the IRS will generate hundreds of billions in revenue over 10 years above what it will cost to bolster the agency through hiring, training and technology implementation.

As a businessman, I can support that kind of investment.

Adequate funding for the IRS should not be a partisan issue. Let’s make sure that whatever form the Build Back legislation takes, the administration’s plans to fund the IRS are included. It will take time to strengthen tax enforcement, but taxpayers need and deserve an IRS that works for them, not against them.

If that happens, maybe they won’t hate him anymore.

Alexander RM Boyle is the former vice president of Chevy Chase Bank.

©2022 The Baltimore Sun

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