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Why your tax refund might be late – again

The Internal Revenue Service building in Washington, DC


Patrick Semansky/Associated Press

We’ve chronicled the many problems of the Internal Revenue Service, from delayed tax refunds to tens of millions of unprocessed tax returns. It’s hard to imagine that the dysfunction could get worse. But last week the National Taxpayer Advocate and the Treasury Inspector General for Tax Administration revealed even more dismay.

The IRS is asking Congress for more money to improve taxpayer service. Only one in nine taxpayer appeals for help were answered last tax season, taxpayers’ attorney Erin Collins reported last month. The backlog of returns has swelled to 24million, and the Treasury warns that 2022 could be a “very frustrating season”.

Much of the blame lies with Congress, which ordered the IRS to set up complicated transfer payment programs (particularly child benefits) overnight. Ms. Collins told an oversight panel of the House Ways and Means Committee that the IRS had filled fewer than 200 of the 5,000 vacancies this tax season. Some new recruits don’t show up. Welcome to the club, companies would say.

The IRS complains that it has trouble competing for workers with private employers. Alright, but why not raise salaries? The agency’s loans increased by 17% last year. That’s a bigger raise than most Americans received. The agency began the fiscal year with more than $1.4 billion of that money unspent. But no amount of money can fix bad tax management.

“Despite this significant and ongoing hiring shortfall, the IRS continues to close tax processing centers,” the Treasury IG for Tax Administration noted in a report last week. The IRS moved the work to processing centers in Kansas City, Missouri, and Ogden, Utah, where it struggled to hire new workers. The unemployment rate in Ogden is 1.3%.

Many companies are investing in technologies that improve worker productivity. Not the taxman. The IRS’ mail-processing equipment is “20 years old and has not had any significant technical upgrades in over 15 years,” reports the IG. How many companies have not updated their Windows 2000 software?

The IG says it notified IRS management in April 2021 that the mail-processing machines needed updating or replacing, noting that “the machines had been serviced nearly 300 times” between January and March 2021. IRS response: “An expedited review was not necessary”.

Such mechanical malfunctions cost the IRS $56.2 million in interest from taxpayer remittances last year that were not filed immediately, the IG reports, adding that “the cost of replacing or rebuilding current equipment is only a fraction of these lost costs, ranging from $360,000 to $650,000.

The IG also pointed to the “obsolete dust collectors” jamming equipment. And in case you’re wondering what happened to your letter which the IRS claims it never received: “Slicers sometimes cut correspondence off the envelope, causing IRS employees to piece together and save this correspondence.”

IRS management has little incentive to improve efficiency or service because it can use taxpayer frustrations to demand more money from Congress. Any company as badly run as the IRS would have ceased to exist long ago, but there is rarely accountability in Washington.

Journal Editorial Report: Some say it’s common sense. Others think it’s a moral panic. Images: AFP/Getty Images/Zuma Press Composite: Mark Kelly

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