The coming tax season “disaster”
The IRS is in big trouble and taxpayers may be the ones who suffer the consequences this tax filing season. The mammoth backlog of unprocessed returns from the previous year, coupled with sclerotic taxpayer help lines and a bundle of unique tax challenges for this year, add up to a potential “disaster.”
According to a report from the National Taxpayers Union, “policymakers with two choices: allow a filing season full of delays, unresponsive taxpayer services, and general dysfunction to run its course, or step in and offer solutions.”
Among the solutions NTU suggests are some that seem both obvious and essential to avoid making a terrible situation even worse:
…taxpayers should absolutely not be assessed penalties or charged interest because of the IRS’s inability to process returns in a timely manner. The aforementioned bipartisan letter signed by over 200 Representatives and 25 Senators to Secretary Yellen provides a good framework for addressing this issue.
The letter requested that the IRS halt late fees and penalties for taxpayers who have paid 70 percent of assessed tax liability and have pending penalty abatement requests waiting to be processed. It also recommends halting automated collections until three months after the end of this tax season, and temporarily speeding up the reasonable cause penalty abatement process by eliminating the need for written correspondence.
There’s also a call for greater taxpayer privacy protections:
Since 2016, at least two leaks of taxpayer data have been used to perpetrate identity theft schemes. Unfortunately, those are just the people who got caught doing so.
The IRS’s watchdogs have been warning for years that the IRS does not meet acceptable standards of data security. A 2020 report by the Treasury Inspector General for Tax Administration looked at 67 requests for taxpayer data that should have been monitored for unauthorized access. Of these, just 6 received adequate scrutiny — 30 received inaccurate and incomplete audit trails, and 31 received no audit trails at all.
The focus of Congress should be on addressing these kinds of institutional failures, not giving the IRS access to entirely new and expansive sources of taxpayer information.
And broad reform:
While Congress is focused on IRS reform, it should not overlook the opportunity for more far-reaching changes to improve the agency’s everyday functioning. The nonpartisan Government Accountability Office has 197 open and unfulfilled recommendations for the IRS, including 22 priority recommendations.
Let’s add one more: fundamental tax reform that makes the current tax code, and the IRS that enforces it, obsolete. Whether it’s a fair tax or a flat tax, tossing the existing system in favor of one that’s simple, broad-based and fair would eliminate the need for much of what the IRS currently does. Put it on the “to do” list for the next Congress.