Is There a Perfect Storm Looming at the IRS?

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A Perfect Storm Looming at the IRS- New Tax Law, Budget Cuts, Paper-Based Processing were already putting pressure on the agency- and then the Coronavirus hit.

                For those who filed their tax returns and are expecting a refund, the IRS has stated that most refunds are being processed at a normal pace- if filed electronically. It is currently uncertain when those who mailed paper forms can expect any refund money. The mail has been piling up at IRS centers and no one has been around to handle it. On top of that, even those who ‘e-filed’ might have to wait an additional twelve weeks or more for any refund if it was amended, flagged for possible identity theft, or is subject to some other extenuating circumstance. On top of that, 35 million people have yet to receive their stimulus check while 34% of that crowd have until October 15th to fill out a form on the Internal Revenue Service’s (IRS) website… or they won’t get the money that is entitled to them. Venturing into the hypothetical, as many financial experts agree a second stimulus is needed to help Americans through this crisis, if legislation mandates another slew of payouts, this would only tighten the pressure on the IRS to perform their duties for the country’s citizens.

Auditing and collection services were paused due to the pandemic, but this only means a hefty backlog must be ballooning in size. While a large chunk of feds who work for the IRS were able to telework, many stationed in IRS mailrooms, call centers, return processing centers, and walk-in help centers were put on paid leave. Before the COVID-19 crisis, the agency was already grappling to implement regulatory changes sprouting from the 2017 ‘Tax Cuts and Jobs’ legislation. In March 2020, as Federal offices were shuttering their doors, 119 of these provisions were still in the processes of integration with the existing systems.  And then those systems were upended by a global pandemic. Fax machines and laptops have taken over the IRS’ day-to-day operations, and a lot of stuff isn’t getting done. The Washington Post reports: “Paper transactions are still a backbone of IRS operations.” Then, if you adjust for inflation, the agency’s budget has been slashed so much that it is the lowest it has ever been in the last two decades. So, an agency that is vital to the blood-flow of the nation’s economy is overwhelmed by new laws, a novel virus, and outdated technology… with less money to work with than it’s used to. As a former CIO of the IRS recently remarked, “I would have thrown myself across the railroad tracks if I were still there.”

In addition to all the pressure already on the IRS to manage the country’s revenue, consider this: the workforce at the IRS is the oldest of any other Federal agency- the exact demographic heavily hit by the Coronavirus. They are going to want to feel safe before returning to their office. Over 50% of the staff is over 50 years old. Of the 14,300 federal employees to test positive for the coronavirus, 194 worked for the IRS. And of the 101 feds who have sadly passed away from COVID-19, 4 were employees of the Treasury’s revenue service.

Until Next Time,

benefits ben

**Written by Benjamin Derge, Financial Planner. The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Benjamin Derge and not necessarily those of RJFS or Raymond James. Links are being provided for information purposes only. Expressions of opinion are as of this date and are subject to change without notice. Raymond James is not affiliated with and does not endorse, authorize, or sponsor any of the listed websites or their respective sponsors.

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