IRS In Trouble After Funds Drop From Pandemic

( Things just seem to be getting messier and messier over at the Internal Revenue Service.

If you thought the 2021 tax filing season was a train wreck, you have another thing coming, according to many people who are in the know.

People inside the agency are saying the pandemic has put an enormous amount of pressure on the IRS. Combined with technology that’s out of date and a decade’s worth of budget cuts, the pandemic is causing the IRS to scramble, to say the least, during its busiest time of the year.

As Mark Everson, a former commissioner for the IRS, said recently:

“They’re thinly strapped. Then you have the pandemic itself, and what happened is they went down early and they went down hard, and they haven’t come back.”

While the filing deadline for 2021 annual taxes is a little more than a month away, millions of people are still waiting for their refunds from last year. That’s because the IRS has a mountain of paperwork that’s piled up, as the agency hasn’t been able to wrap their heads around it.

To try to fix the issue, even veteran workers at the agency have been re-assigned to help with the mail. The IRS is also trying to hire a massive number of people to try to work on the extreme backlog.

The issue hasn’t just caused problems with people’s refunds. Taxpayers have also faced roadblocks for applying for mortgages or borrowing money for a car or to get college loans since they haven’t been able to provide copies of their most recent tax returns.

While taxpayers are causing quite a ruckus as they worry about their returns for this year, many lawmakers are putting pressure on the agency to step it up for their constituents.

In response, the IRS has agreed to cut down on the number of collection letters that are automatically sent to taxpayers, since many of them are sent by mistake. To this point, though, the IRS has refused to take more significant action such as suspending fines.

That hasn’t completely satisfied some lawmakers, such as California Democratic Representative Linda Sanchez, who said recently:

“While this was welcome news, there is a continued risk that low- and middle-income filers will receive confusing notices while they wait for IRS to process their correspondence or returns. At this time, we need more clarity into which additional notices the IRS plans to suspend as well as those it does not have the authority to suspend so that Congress can work with the Department of Treasury to provide further relief where needed.”

At a time when the IRS has a significant backlog that’s causing huge problems, the Biden administration has considered adding to this issue.

Instead of relieving some of the tension, the White House has proposed putting forth new tax reporting rules for financial transactions that would cause a greater paperwork burden for the IRS.