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Filing Season on Time, Rettig Tells Congress

Posted on Nov. 23, 2020

The IRS started programming for the 2021 filing season more than a month earlier than planned and expects to start receiving returns in late January or early February.

“We are on schedule,” IRS Commissioner Charles Rettig told the House Ways and Means Oversight Subcommittee at a hearing November 20.

The agency accelerated its filing season programming in preparation for a possible lapse in appropriations or passage of a continuing resolution in place of its budget, Rettig said.

“We are cautiously optimistic — which is, for a risk-averse agency, the highest level of assurance we can give you — that we will open on time,” Rettig said.

The IRS pretests more than 1 million tax forms before determining its systems’ readiness for filing season, Rettig added.

“We will advise you if something causes that to change,” Rettig said. 

Checks in the Mail 

Rettig discussed a range of topics at the hearing, including the IRS’s mail backlog, complaints about the agency’s audit priorities, and the last-mile push to distribute economic impact payments (EIPs).

The IRS has a backlog of about 1 million unprocessed income tax returns, about 3 million pieces of unopened mail, and another 6.8 million returns in process, the commissioner said.

Carryover of returns processing from fiscal 2020 to fiscal 2021 will be a little higher than normal, but it shouldn’t interfere with operations, Rettig said.

The IRS is experiencing up to six weeks of backlogs at its Kansas City, Missouri, facility, but three other submission processing facilities temporarily shuttered because of the pandemic are now just a few weeks behind, Rettig said.

Agency employees are being offered overtime pay and weekend work to address the bottleneck, the commissioner said. 

I Want My EIP 

Many subcommittee members complained that constituents still haven’t received EIPs or tax refunds.

Rep. Danny K. Davis, D-Ill., said he’d heard complaints that the IRS requires prisoners to complete a complicated tax form to receive their EIP, even though the agency knows incarcerated individuals have no access to the EIP nonfiler portal.

Rettig said all EIPs owed to incarcerated individuals should be mailed by the end of November.

However, Rettig said his hands were tied by Treasury policy when it came to replacing EIPs mistakenly sent to spouses who have abused their partners.

“Those payments were properly made,” Rettig said. “We are extremely sensitive to victims of domestic violence, and certainly we have employees and family members who are victims of domestic violence.”

“If we had discretion, or believed we had discretion,” to replace EIPs appropriately, “we would do so,” Rettig said.

“We cannot get involved in something that is beyond our legal and statutory authority,” the tax chief said, adding another plea for the IRS to be involved in drafting future legislation. 

Rich Taxpayer . . .  

Committee Democrats repeatedly took Rettig to task for statistics that they said suggest that the IRS audits the rich less than the poor.

“I’m extremely concerned with the unfairness in the IRS’s audit priorities,” subcommittee Chair Bill Pascrell Jr., D-N.J., told the commissioner.

Pascrell said he had asked the Government Accountability Office to provide data on IRS audits by income group.

Rep. Linda T. Sánchez, D-Calif., said the audit rate for taxpayers earning more than $1 million a year has been halved over the last decade, “but the automated program that audits low-income taxpayers is chugging along.”

Rettig said almost all of the IRS’s most experienced tax examiners are concentrated on high-income tax audits. 

. . . Poor Taxpayer 

Rettig noted that the 2019 IRS Data Book shows that individuals earning $10 million or more are audited at a rate of 8.16 percent, versus 4.39 percent for people with incomes between $5 million and $10 million and 2.39 percent between $1 million and $5 million, while earned income tax credit claimants are audited 1.1 percent of the time.

“There is no focus on lower-income taxpayers,” the commissioner said.

But Pascrell argued that using percentages to talk about audits “is very misleading.”

There have been 1,500 audits of taxpayers making more than $10 million and 380,000 audits of earned income tax credit taxpayers, Pascrell said. “I don’t think percentages are the whole answer,” he said. 

$14 Billion Not Enough? 

Rettig agreed and turned his answer into a plea for more congressional funds.

“We need the resources to do that better,” Rettig said. “The EITC should not be an issue for any American.”

“We need to change that statute,” Rettig added. The commissioner and subcommittee members agreed that the EITC law, originally passed in the 1970s and amended many times since, is complicated and confusing for both taxpayers and tax administrators.

Rettig also endorsed the IRS Advisory Council’s proposed $14.3 billion agency budget, while adding that it “realistically might not take into account the hiring freeze from 2011 to 2018, and the patchwork on our systems to get us where we are.”

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