The IRS Is in Big Trouble and It's Only Getting Worse

First, the IRS had the same problems that ordinary businesses encountered with covid lockdowns. They had to shut down their offices too in 2020 to limit the spread of the virus.

But the IRS gets a huge amount of mail, which they normally are processing constantly, especially depositing checks to fund the government. But the staff was at home for months, with the mail just piling up in closets.

And then the politicians hit on the brilliant idea to send out tons of free money to we the people to help get everyone through the pandemic. And of course they assigned this new task that had never been done before to the Treasury Department, that is the IRS, to get it done. And of course this task was assigned the highest priority of all.

The IRS has a lot of procedures for doing its routine tasks, like collecting tax money, doing tax audits and such. But they had NO procedures for rushing free money out to we the people. And the IRS has been famous for years for having antiquated computers and a patchwork of various computer systems that don’t work well together in any modern sort of way.

On top of that, the IRS operating budget has been shrinking for many many years. So the staff had been getting smaller for a long time and suddenly the most urgent task in the government gets dumped in their laps, all to be done on top of their usual huge work load, that is, as soon as they return from hiding from the pandemic at their homes.

Of course we the people like it this way. Keep the IRS busy and they won’t have time to audit our returns and collect more money. The percentage of returns that actually gets audited has been dropping significantly for years. But now they also didn’t have time to process 2019 tax returns and send out refunds. They were sitting unopened in those closets. I have many clients who have not received their 2019 tax refunds yet.

To their credit, I haven’t heard any complaints from anyone at the IRS about the impossible job they have been given. This is common for accounting staffs in government and businesses all over the country. They are doing highly skilled work, little understood by the non-accounting staff who have very little clue about what they do. The usual idea is that they all have computers and all they have to do is push a button, right?

As for the Getting Worse part, you may have noticed that in the last week Biden has begun to try to sell his latest spending spree with the idea that the IRS will be auditing a ton of the fat cats to bring in a lot more money to fund all these day dreams. He’s been a politician in Washington for over 50 years, never running a real business and never seeing any of the actual mechanics of an essential and under appreciated activity like the IRS. They’re not even able to keep up with their usual job of collecting the tax money, because of their new high priority task of sending out all the free money. And now he’s also pitching the idea of sending out even more free money regularly to families with young kids. It is so easy to imagine utopias in the mind, but it’s a lot harder to actually get something accomplished in the real world.

As of Friday (yesterday) the IRS reported that as of April 30, they had a backlog of 17.1 million unprocessed individual income tax returns (Forms 1040). The IRS now has a lot of complicated new things it must check, as now they must confirm that those who did not receive all their free money during the pandemic are supposed to get that as an extra credit after they file their returns. No problem, just add it to the To Do list of the IRS.

I will end with an amazing fact reported on Friday in the report by the Treasury Inspector General for Tax Administration. They reported that the “IRS faces staffing challenges, and that its ability to resolve its backlogs is hindered by the fact that many printers and copiers are not working.” That’s right, many printers and copiers are not working!! See what I mean?