Washington, D.C. – Executive Director Chad Hooper of the Professional Managers Association (PMA) – formed in 1981 by Internal Revenue Service (IRS) Managers as a national membership association representing the interests of professional managers, management officials and non-bargaining unit employees in the federal government – released the following charge and response regarding the bipartisan Congressional letter urging IRS action to improve taxpayer services during of the 2022 filing season.
PMA echoes the lawmakers’ enthusiasm for providing high quality and effective taxpayer services. We are also equally concerned regarding the current state of the IRS. However, there is an apparent disconnect between Congressional demands and the IRS’s practical capacity to address them. This disconnect exacerbates inefficiencies and results in negative taxpayer experiences, as well as excessive burden on our members and their staff. Tax policy and tax administration must be better connected, or taxpayers and PMA members alike will continue to struggle through each tax season while the IRS is blamed for problems outside of its control.
Charge: Halt automated collections from now until at least 90-days after April 18, 2022.
Response: This recommendation is possible for the IRS and does not require a significant lift. However, lawmakers should clarify they are only requesting a pause on automated lien/levy issuance. The automated collection team would still need to function to help taxpayers establish payment plans, among other related duties.
Charge: Delay the collection process for filers until any active and pending penalty abatement requests have been processed.
Response: Technically, this is already part of the IRS’s procedure. The issue that arises in practice is that when the abatement request is sitting in unopened or unsorted mail, we cannot know if the request is pending if we do not know it is in the mail room. When the IRS does scan an abatement request into its inventory, collection actions are held in abeyance until the case is closed.
We understand the mailroom backlogs are an area of concern for Congress and taxpayers. In the short term, Congress can ease the burden by passing robust appropriations to allow for the hiring, onboarding, and training of new employees. While the IRS is operating under a continuing resolution, these hiring and training objectives are very difficult to accomplish, if possible even at all. In the long term, dedicated multi-year funding for technology modernization would allow the IRS to improve electronic systems and take significant burdens off paper processing.
Charge: Streamline the reasonable cause penalty abatement process for taxpayers impacted by the COVID-19 pandemic without the need for written correspondence.
Response: The objectives of this request are unclear and will cause additional service delivery problems. Taxpayers are already eligible for a “first time abatement” without any documentation. Therefore, this change will particularly impact individuals who repeatedly incur penalties. The IRS does not typically accommodate repeat offenders and it is unclear why “COVID-19” is a valid reason for an individual to repeatedly fail to file and/or pay their taxes in a timely manner.
Even so, this reform would presumably require taxpayers to call or visit the IRS to receive their abatement. Given that telephone service delays are already a point of frustration for taxpayers and IRS call centers are overburdened and understaffed, driving additional traffic to those phone lines will likely exacerbate existing problems. The individuals ultimately benefitting would be taxpayers with a history of noncompliance, while diligent taxpayers who are historically compliant experience further negative impact on customer service bandwidth.
Charge: Provide targeted tax penalty relief for taxpayers who paid at least 70 percent of the tax due for the 2020 and 2021 tax year.
Response: Representative Judy Chu (D-CA) has introduced the Taxpayer Penalty Protection Act (H.R. 5155) into the House of Representatives to do exactly this. The legislation has bipartisan support and is currently being considered in the House Ways and Means Committee. We encourage the U.S. Senators who signed this letter to introduce and support companion legislation.
It is the job of Congress to pass legislation, which executive branch agencies such as the IRS will gladly execute. However, calling upon the IRS to unilaterally engage in this activity mid-filing season is catastrophic for the successful execution of the season. Mid-season, retroactive tax law changes require entire components of the IRS to halt and reprocess their inventories. When a completed tax year is involved, this leads taxpayers to file amended tax returns which only further hamper effective tax administration. This causes severe delay and confusion and dramatically increases the potential for errors – making the tax filing season more challenging for everyone involved. Even a reform meant to increase efficiency, results in the opposite when implemented in this manner.
We highly discourage Congress from requesting the IRS engage mid-season retroactive tax changes. Rather, Congress should pass legislation on this issue to go into effect in subsequent filing seasons.
Charge: Expedite processing of amended returns and provide TAS and congressional caseworkers with timely responses.
Response: It is our understanding that TAS is not taking these cases because TAS is also overwhelmed with work and not because the IRS is delayed in responding to them. The amended return problem for small businesses is one of Congress’s own making. For example, Congress implemented the Employee Retention Tax Credit in such a way that many businesses had to amend their employment tax filings. Amended employment tax returns were once a rare occurrence and now the IRS is drowning in them.
Statutorily, the agency has no hard deadline to process an amended claim and frequently the IRS changes the processing timeframe depending on workload. For example, during a slow period, the timeframe may be 8-12 weeks. During filing season, it may increase to 12-16 weeks. At this time, amended returns are a lower priority because the IRS still has unprocessed original returns.
What Congress may not understand is that some of the amended claims may be changes to original returns that have still not processed. As of December 31, 2021, the IRS had more than 22.5 million original tax returns in its pipeline. We must process the originals before we can process amended returns.
Finally, from an equity perspective, it is unclear why Congress would place amended returns ahead of original returns, particularly given that amended returns often signal an oversight or error was made in the original return. Why would Congress want these individuals to be able to “cut the line” ahead of the 9.2 million taxpayers whose original returns were not yet transcribed?
Instead, Congress should not pass laws which will lead to high numbers of amended claims. Congress should encourage constituents to wait until they receive all necessary tax documents and information before filing an original return to decrease the likelihood that amendments are required post-filing.