IRS Struggling to Administer Tax Code

IRS Struggling to Administer Tax Code

( – Did you know that Americans didn’t pay a federal income tax prior to the Civil War? To fund the government, it collected excise taxes on virtually every commodity imaginable, including but not limited to alcohol, tobacco, tea, and many others. Today, many of the federal taxes you pay were created by Congress in the 1920s and 1930s. At that time, lawmakers created gift, estate and Social Security taxes. Later, it would add Medicare taxes.

As the federal government has continued to grow larger every decade, so has the need to collect more revenue. The tax code is now a whopping four million words. To put the growth of the tax code into perspective, Congress added 2.6 million words just since 2000. The code is so massive and tax filings so numerous that the IRS is having difficulty getting out from underneath the weight of the filings in 2020.

IRS Is Buried

The number one responsibility Congress tasked the IRS with is collecting taxes. Yet, Congress continues to make it harder for the tax collection agency to do its job. There are numerous reasons why this is happening. Over the last 20 years, Republicans and Democrats have moved far apart in their views regarding the role of government. As the parties change hands in Congress every few years, it has a see-saw effect on taxes.

Republicans want fewer taxes and a smaller government. Democrats want to collect more taxes and grow the government.

Stuck in the middle is the IRS and its bureaucratic nightmare. According to the National Taxpayer Advocate, the IRS is against the wall. In 2020 and 2021, Congress passed numerous tax laws to help Americans struggling due to government policies surrounding COVID-19. Those changes left Americans dazed and confused at tax time.

In 2019 and 2020, IRS agents received approximately 100 million phone calls from taxpayers. In 2021, it exploded to 282 million, and the call volume isn’t expected to slow down in 2022. As the volume increased, the agency’s workforce did not, nor did its investment in newer technologies. In 2019 and 2020, the IRS answered around 25% of the incoming calls. In 2021, it dropped to 11.4%.

Is Congress Providing Relief?

On Tuesday, March 15, President Joe Biden signed the $1.5 trillion fiscal year 2022 omnibus spending packing. The legislation provided the IRS with a $675 million increase to its budget. Congress intended the IRS to improve its filing and accounting services, target tax cheats, and replace old technologies with new ones.

Despite the increase in budget, Democrats claim it’s not enough. Republicans say the tax agency continues to fail to use its existing funds to make technology improvements that could lower its future budget.

The IRS said it will use some of the increase in its budget to hire 5,000 workers over the next several months. Still, that will be too little too late for the 2022 tax filing season.

According to experts, how the IRS uses its budget will determine what taxpayers can expect in the future. One thing is certain: the partisan divide won’t solve the problem, especially in the middle of a heated midterm election. While Republicans are expected to win back the House and possibly the Senate in November, we’ll see.

Happy tax filing season!

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