“Unlike any other filing season, the IRS is having to take unprecedented and drastic actions to address Coronavirus Disease 2019 (COVID-19) to protect the health and safety of its employees and the taxpaying public.”
With that, the Treasury Inspector General for Tax Administration (TIGTA) opened its interim report on the 2020 tax filing season.
The 24-page report gives the agency credit where it is due, but also gives readers a sense there’s trouble waiting in the wings. “The actions the IRS is taking in response to this pandemic will affect its ability to provide timely customer service and tax return processing,” the report warns.
The actions the IRS has taken so far, such as closing Tax Processing Centers, Taxpayer Assistance Centers, and other offices across the U.S., along with taking employees out of IRS offices and mandating they work from home, are all meant to protect IRS staff and taxpayers alike from the coronavirus’ spread.
But what’s likely to help slow the virus could also hinder how the IRS processes tax returns and handle taxpayer questions.
Tax Changes Present Challenges
The IRS has to follow whatever changes are set forth by any legislation passed since the previous tax year, or provisions of older laws that now come into play. TIGTA says the IRS this year faced a number of tax changes, mandated by a host of tax-related legislation:
- Further Consolidated Appropriations Act (2020)
- Taxpayer First Act (2019)
- Budget Bipartisan Act (2018)
- Tax Cuts and Jobs Act (2017)
- Protecting Americans from Tax Hikes Act (2015)
- The Patient Protection and Affordable Care Act (2010)
These new tax provisions set the stage for a perfect storm of sorts for the IRS, mandating numerous changes and updates to tax law before the procedural upheaval forced by the pandemic.
Processing Tax Returns
Along with updates to processes and procedures mandated by changes in the law, the IRS also made extensive changes to the Form 1040, U.S. Individual Income Tax Return, and the schedules associated with it. Three of the six Form 1040 schedules that were unveiled as new for Tax Year 2018 are now obsolete. Information from the discontinued schedules is now included on other existing schedules, or on the revised Form 1040 for Tax Year 2019.
Legislation also required the IRS to create the new Form 1040-SR for use by taxpayers age 65 or older to file their individual income tax returns. All the changes to the Form 1040 varieties required the IRS to update tax forms, instructions and publications.
The audit report says to date, the IRS has processed about the same number of tax returns as it processed this time last year—about 59 million returns. Refunds, however are down about 2% both in number and amounts from the previous year’s level at this time.
The IRS expects to get a total of some 155 million individual tax returns during calendar 2020, so that means about 96 million tax returns still have to make their way to the IRS.
Enter COVID-19
Throw into this mix precautions aimed at slowing the spread of the novel coronavirus, or COVID-19. These measures were undertaken to protect the health and safety of IRS employees as well as taxpayers. In early March, the IRS workforce was informed of the coronavirus threat and was directed to the Centers for Disease Control and Prevention website and an internal IRS website on COVID-19.
By March 13, it was time to clear the office; Commissioner Chuck Rettig ordered implementation of a number of previsions. They included maximizing telework flexibility for eligible employees Service-wide, expanding leave flexibility, reducing in-person contacts for all front-line employees with face-to-face interaction with taxpayers, implementing travel restrictions, and providing access to hygiene products to protect the health of employees and taxpayers entering facilities.
For any IRS location not already closed, the agency is also reducing staffing by about 50% to enhance social distancing for those who perform mission-critical work at the Tax Processing Centers. Processing of paper returns has been discontinued for the foreseeable future.
Despite the dispersed workforce, the IRS has also been tasked with sending out millions of economic stimulus payments to taxpayers.
Providing Customer Service
TIGTA, like the IRS, sees the IRS website as the most successful self-assistance option for taxpayers. Nearly 292 million visits were logged by IRS.gov this filing season as of February 28. The audit gave IRS good marks for the online tools available on the website.
Other attempts at assistance, though, aren’t so successful.
Because of the impact from the coronavirus, the IRS has shut down its central toll-free assistance number, opting instead to direct taxpayers and tax pros to an automated system, or to the IRS website for answers.
During the time when the help line was in operation, it fielded some 17 million phone calls during business hours up to February 28. Of those calls, about 8 million were answered with the automated system and another 4 million with human operators. The Inspector General faulted the IRS however, because the level of service put forth by the IRS was higher than the figure the auditors calculated.
Since then, the IRS has begun testing options for telephone assistors to work from home or from other offices. The auditors said they will continue to evaluate the agency’s efforts going forward.
Other Issues
TIGTA also says a tip led them to find some sloppy security at tax processing centers. Apparently a referral in January told of the potential for theft of taxpayer data from unsecured waste containers for sensitive documents. Investigators carried out overnight checks at the Austin, Texas; Fresno, Cal.; Kansas City, Mo.; and Ogden, Ut. Tax Processing Centers in February.
Out of a total of 185 sensitive document waste containers found, 56 or 30% were unlocked; 34 of those were unattended. Two more containers, while locked, were so full documents could be pulled out from the slot without opening the container.
Investigators also found taxpayer data on employees’ desks, in common areas accessible to anyone, and in recycling bins next to employees’ desks.
IRS management is working with the Inspector General’s Office to rectify the situation.
The overall conclusion to all these factors is obvious: with a much smaller workforce available to do a bigger-than-anticipated workload, something may have to give. The audit, unfortunately, can’t give us any direction in that; it can only determine that a situation exists. Until then, the men and women of the Internal Revenue Service will have to do what they’ve done in tax seasons past: Keep calm and carry on.
Ambassador Tax Services, Inc.
