Tax season kicked off last Monday, and the biggest question on most taxpayers’ minds is how quickly they will get their refunds. Receiving a refund can normally take up to six weeks, but staffing issues at the agency might make that turnaround time much longer.
Customer service is a big part of making tax seasons successful, and the Internal Revenue Service is one of the lowest-scoring agencies in that area, according to the Taxpayer Advocate Service annual report to Congress for 2019.
Budget cuts are a contributing factor to the IRS’s poor customer service — it’s harder to garner more hires with less money. Agency head count has fallen by 20% over the past 10 years, according to the National Treasury Employees Union, while the number of tax returns to process has increased by 9%.
Last year, only 29% of taxpayer phone calls to the IRS were answered. That is down from 35% in 2018, according to the Taxpayer Advocate Service.
Regarding the staff shortage, the union’s president, Tony Reardon, said that “IRS employees, to their credit, have managed to do more with less, but after 10 straight years, it is taking a toll on their morale and their ability to do the quality work that the American people expect and deserve. … At the dawn of the 2020 filing season, we hope the administration and Congress take note of the hard, government data documenting the damage these constant budget cuts have caused.”
For 2020, the IRS received a 1.8% increase in funding, a decline when adjusted for inflation. The Tax Policy Center recently reported that IRS funding fell 21% between 2010 and 2020, when adjusting the appropriations for inflation.
The IRS is no different from any other organization that experiences staffing shortfalls, but the problem becomes even more acute when amended returns are thrown into the mix. In any given year, the IRS processes amended returns that it has already examined but taxpayers want changed. Returns can be amended up to three years prior to 2019, and they potentially complicate the issue to review current-year tax returns in a timely manner.
“[Amended returns] eventually [are] going to slow things down,” said Mel Schwarz, Director of Tax Legislative Affairs at the tax firm Eide Bailly and a former federal tax director at Grant Thorton.
Schwarz said it’s unclear how the IRS will handle amended returns, but one option is to take the amended return at face value, release the refund, and then review the document after the tax season.
“It’s going to depend upon how much effort the IRS decides to devote to examining claims as opposed to just paying them and coming back and examining those they decide to examine after the tax season is over,” Schwarz said.
At issue here, which also applies to 2019 tax returns, is if the taxpayer is expecting a refund from any return submitted and the IRS disagrees and declares they need to pay more tax. In such cases, interest and penalties start accruing on the taxpayer.
With the IRS short-staffed, it might take them longer to audit returns in question, which could potentially be expensive for taxpayers because interest and penalties can continue to grow until the tax dispute is settled. So a short-staffed IRS should not be considered a plus for taxpayers thinking they can cheat the system. It could end up costing them plenty.
“This is not an opportunity to borrow from the government by filing a bogus refund claim,” Schwarz said.
