Chair Bill Pascrell & Ranking Member Tom Rice
Committee on Ways & Means
Subcommittee on Oversight
1102 Longworth House Office Building
Washington DC, 20515
Re: Written Comments for Feb. 8, 2022, Hearing with the National Taxpayer Advocate on Challenges Facing Taxpayers
Dear Chair Pascrell and Ranking Member Rice:
On behalf of the Professional Managers Association (PMA) – the non-profit professional association that has, since 1981, represented professional managers, management officials, and non-bargaining unit employees at the Internal Revenue Service (IRS) – I write to provide additional information for your February 8, 2022, Hearing with the National Taxpayer Advocate on Challenges Facing Taxpayers.
Thank you for hosting this hearing. We understand many Members of Congress are frustrated by the high volume of constituent complaints regarding the IRS. Our members are also deeply frustrated by the problems at the IRS and genuinely wish they could be doing more for the taxpayers they serve. During this hearing, lawmakers on both sides of the aisle appeared genuinely interested in solving longstanding issues such as the persistence of legacy technology and the difficulties of effective hiring, as well as immediate issues related to the processing backlog. PMA appreciates the bipartisan recognition that real action is needed to revive the IRS.
Additionally, we would like to emphasize two issues highlighted at the hearing: (1) the impact of mid-year tax changes and (2) the excessive burdens Congress has placed on the IRS outside the realm of traditional tax administration.
First, as the National Taxpayer Advocate Erin Collins consistently articulated, mid-year tax changes devastate the IRS. As Collins explained, in 2021 Congress passed the American Rescue Plan Act (ARPA) on March 11 that reduced taxable unemployment compensation by $10,200 per individual. This was undoubtedly critical relief for many taxpayers. Unfortunately, many of those taxpayers already filed their returns. The IRS had to pivot mid-filing season, the busiest time of year, to reprogram its obsolete databases and retrain its personnel. As a result, the IRS had to amend nearly 12 million returns. The IRS still has about one million to go. Congress must stop retroactive, mid-year tax changes. Current IRS infrastructure simply cannot handle them.
IRS employees are not the only ones confused and overwhelmed by mid-year tax changes. When Congress enacts a well-intentioned retroactive, mid-year tax change, taxpayers and tax practitioners are confused as well. When Congress enacted ARPA, calls flooded IRS facilities. As most lawmakers know, in 2021, a human answered only 11 percent of calls to the IRS. But in the weeks following ARPA – in the middle of the tax season – a human answered barely 4 percent of calls. Everyone was confused. Everyone had questions. No one could provide answers. This is the real impact of mid-year tax changes.
Second, PMA appreciates Ranking Member Rice’s acknowledgement that Congress has “placed some extraordinary burdens on the IRS within the last couple of years.” These burdens are far outside the traditional realm of tax administration. As PMA has previously highlighted to appropriators, the IRS has transformed from a tax administration agency into a benefits agency and an emergency relief agency.
This phenomenon did not originate during the pandemic. Since 1993, the Congressional mandates falling on the IRS, outside the traditional filing season and tax administration roles, have dramatically increased. The IRS has been called upon to manage healthcare expansions and alternative energy credits. During the 2008 economic crisis, the Congress called on the IRS to stabilize the housing market but did not provide tools for the IRS to independently research land deeds and titles resulting in widespread burden falling on taxpayers to provide documentation. Unlike the Department of Housing and Urban Development (HUD), the IRS is not equipped to interpret deed and title recording practices varying from county to county, or town to town.
To administer the Individual Taxpayer Identification Number program, which provides Social Security-type numbers to non-citizen taxpayers, the IRS needed to learn how to examine foreign passports, foreign medical records, and foreign birth certificates, among others. Unlike Immigration and Customs Enforcement (ICE), IRS employees are not forensic examiners for foreign documents.
To administer generous, refundable tax credits for families, the IRS must determine legal parentage and navigate complex custody issues. There is no centralized database the IRS can rely upon to independently verify custody. As a result, taxpayers must provide extensive documentation demonstrating legal custody. Because 50/50 custody arrangements are common in state family courts, this can become an absurd exercise where the IRS must ask parents for calendars marking each night their child slept in their home.
Congress needs to understand how difficult it is to administer these types of credits and programs. Despite expanding mandates, the IRS has not seen a commensurate increase in funding. In 2019, the National Taxpayer Advocate highlighted this conflict in noting the IRS is neither funded nor staffed to serve as a benefits agency. This hinders the IRS’s ability to perform critical functions such as collecting $3.5 trillion in revenue, processing 253 million tax returns, and issuing $452 billion in tax refunds.
PMA appreciates that both Republican and Democratic lawmakers raised these two issues at the hearing. As Congress considers proposals to improve the IRS and deliver essential services to the American people, we urge Congress to view those proposals through the lens of these issues and remember: (1) mid-year tax changes are logistically impossible and hinder taxpayer services, and (2) if Congress would like the IRS to act as more than a tax administrator, it must provide the resources to for the IRS to take on these roles because currently, the IRS is struggling to even be a tax administrator, let alone serve these additional priorities.
PMA would also like to clarify and provide additional insights on several issues raised at the hearing: (1) the hiring challenges at the IRS, (2) the $1 billion in unspent funds, and (3) the inventory surge teams being used to mitigate the backlog.
1. Hiring Challenges at the IRS
Hiring is a real and substantial challenge for the IRS, as it is in many areas of the federal government due to archaic and convoluted hiring procedures. However, the problem at the IRS is exacerbated by insufficient engagement with partners and stakeholders. In prior years, PMA’s Kansas City Chapter helped attract student interns at the GS-2 level. This year, the agency did not respond to our Chapter President’s offers of similar support. Overall, it is not clear the IRS is using the full extent of tools in their toolbox to attract new talent.
PMA also feels the IRS could offer external workshops on how to navigate USAJobs for candidates who may be interested. Or they could develop content and/or presentations that groups like the National Treasury Employees Union (NTEU) and PMA could use in our own outreach to partner organizations. Stakeholders like PMA could also attend job fairs on the agency's behalf.
Unfortunately, these are palliative measures. Congress needs to modernize the General Schedule pay system so federal agencies can actually compete for talent in a modern market. “We believe there is a need to consider major legislative reforms of the white-collar federal pay system,” wrote the Secretary of Labor, Director of the Office of Personnel Management, and the Acting Director of the Office of Management and Budget in the December 2021 report from the President’s Pay Agent.
The unemployment rates in Austin, Ogden, and Kansas City (where the largest IRS processing facilities are housed) are all below 3 percent. The IRS does not control wages and benefits so it cannot tweak them to be competitive in those markets. We need Congress to think about this seriously. Should anyone involved in the handling of tax information earn less than someone at an Amazon warehouse or fast-food restaurant? The recent change to a $15/hr. minimum wage was through an Executive Order – not an action taken by Congress to update the Civil Service and make it more competitive. Still, $15/hr. is too low for a civil servant. Civil servants have a mandatory retirement contribution of 4.4 percent if hired after 2014 so already that minimum pay is reduced to $14.34/hr. Amazon is paying a $3,000 sign-on bonus in Austin, Ogden, and Kansas City and their entry-level warehouse workers can earn $17.80/hr. Additionally Amazon offers flexible schedules and shifts each week which the IRS does not.
Further, the antiquated technology at the IRS pushes young people away from public service. PMA members cannot even access our association’s website on their work devices’ default web browsers because their devices operate on outdated technology. Finding people who can operate IRS technology is a challenge. We cannot compete with private sector organizations using a pay system and technology from another era. We can barely compete with fast-food chains with what the IRS has to offer.
2. Unspent Funding
When Congress passed ARPA, it passed section 6428B. The provision says: "$1,464,500,000 to remain available until September 30, 2023 for necessary expenses for the Internal Revenue Service for the administration of the advance payments, the provision of taxpayer assistance, and the furtherance of integrated, modernized, and secure Internal Revenue Service systems, of which up to $20,000,000 is available for premium pay for services related to the development of information technology as determined by the Commissioner of the Internal Revenue occurring between January 1, 2020 and December 31, 2022, and all of which shall supplement and not supplant any other appropriations that may be available for this purpose."
In prior years, the IRS had to raid its personnel budget to fund IT overages, and it seems likely the IRS is spending these funds cautiously because other modernization dollars might not materialize and, if they do not, the IRS will need the $1 billion for "the furtherance of integrated, modernized, and secure Internal Revenue Service systems" which, again, they have all the way until 2023 to spend. In our view, the IRS is being responsible – it spent a third or so in FY21, perhaps it will spend a third or so this year rather than raid personnel budgets and leave the balance for FY23. The IRS is not hiding this money in a rainy-day fund – Congress specifically authorized the agency to hold the money. Be that as it may, the appropriation does not permit the Service to spend the funds on premium pay to recruit for taxpayer services as has been claimed so it does nothing to help the agency's recruiting efforts.
The IRS cannot move money at will unless Congress allows such activity. If Congress would like the IRS to reallocated funding to more emergent needs, it must authorize the IRS to use funding in that way.
3. Inventory Surge Teams
PMA understands the pressing need to allocate additional personnel and resources to Accounts Management (AM). The surge team represents an innovative “all-hands-on-deck” approach to mitigating the backlog impacting taxpayers. However, the IRS’s lack of engagement with relevant stakeholders raises serious concerns about the implementation of this plan.
PMA was informed of the Inventory Surge Team creation a little more than an hour before the rest of the IRS workforce and was not provided an opportunity to relay questions or feedback regarding implementation. As the nation looks to the IRS during the 2022 Filing Season with many concerns and frustrations, it is imperative the IRS use every resource at its disposal to ensure its decisions are effective and do not create embarrassing situations for the Service or unforeseen consequences for our members or the taxpayers they serve. PMA is one of those resources. Unfortunately, only after issuing a letter to Commissioner Rettig raising concerns about the lack of forenotice and questions regarding the implementation of this plan, was PMA afforded a meeting with IRS leadership to discuss the Surge Teams.
Additionally, reports now indicate the IRS did not consult NTEU about this plan either. The IRS cannot conduct such a novel and unprecedented effort to reallocate employees in a vacuum without discussion with either employee or management representatives. This will not improve service delivery and will increase confusion and delay while sowing discord among the workforce.
PMA is appreciative that, since expressing our concerns, the IRS has begun working with PMA to ensure the proper implementation of the Surge Team efforts. We raise this issue to Congress to emphasize the need for oversight to confirm the IRS is working with stakeholders, particularly stakeholders with legal agreements in place mandating a cooperative relationship to improve mission delivery.
Further, we must level-set expectations. There is a sentiment that once the Surge Team timeline ends in September, the backlog issue will be resolved. It will not be. The situation at the IRS is dire and the backlog is historic. Surge Team employees can answer, on average, 20,400 calls per day or reply to 14,400 correspondence cases per day. Over sixth months – if zero employees called out sick or took any leave – the Surge Team could answer 2.6 million total calls or answer 1.9 million correspondence cases. The current backlog of cases is over 9 million, inclusive of amended returns. Congress must prepare for the reality that the Surge Team, doing their absolute best, will make a dent in the backlog but the size of the impact may be marginal. This issue will exist after September 30, 2022.
This is the exact reason long term solutions aimed at restoring the capacity of the IRS are essential. The IRS is under resourced and understaffed across the Service and shuffling personnel from one area to another will only exacerbate problems elsewhere in the absence of long-term investment and improvement.
Thank you for your consideration of PMA’s perspective. Please contact PMA Washington Representative Natalia Castro (firstname.lastname@example.org) if we can be of further assistance on these matters or provide addition insights on the issues facing the IRS.