Advisory Panel Calls for More IRS Funding

December 4, 2020

The Honorable Mitch McConnell
Majority Leader
United States Senate
Washington, D.C. 20510

The Honorable Nancy Pelosi
Speaker
U.S. House of Representatives
Washington, D.C. 20515

The Honorable Charles Schumer
Minority Leader
United States Senate
Washington, D.C. 20510

The Honorable Kevin McCarthy
Minority Leader
U.S. House of Representatives
Washington, D.C. 20515

Re: Recommendation in support of congressional Goals under the Taxpayer First Act

Dear Senators and Representatives:

We write to you today on behalf of the Electronic Tax Administration Advisory Committee ("ETAAC") to recommend that you fully fund the Internal Revenue Service's $12 billion budget request for fiscal year 2021 before you adjourn for the holiday season.

We recognize that Congress has a number of important priorities on its plate, and that IRS funding may not be at the top of that list. However, we ask that you place it among your top priorities for several reasons:

• The IRS runs our tax system well. The IRS is the engine that collects about 96% of the nation's tax revenues at a remarkably low cost. In 2018, the IRS collected nearly $3.5 trillion in tax revenues, and refunded over $464 billion in overpayments, for net collections just north of $3 trillion. The federal tax system operated with an appropriated budget of about $11.2 billion — less than half of one percent of net revenues. A business would be ecstatic to have such a low operating expense ratio.

• The IRS is committed to continuous process improvement. Any organization — public or private — has opportunities to improve. ETAAC's work with the IRS gives us unique exposure to the ms team's efforts to remove bottlenecks and otherwise improve service to taxpayers. We regularly experience an IRS that is passionate about making the taxpayer's experience better, and is very receptive to recommendations from ETAAC and others in that regard. The highly technical nature of this work, coupled with each taxpayer's limited direct exposure to the IRS, means that most taxpayers are not aware that significant improvements are being made every day.

• The IRS is becoming more and more nimble. The CARES Act put the IRS's nimbleness on display. The IRS's ability to begin delivery of Economic Impact Payments within two weeks of enactment of the CARES Act during the tax filing season was nothing short of yeoman's work. Even more encouraging is the way that the IRS continues to work with stakeholders to take the lessons leaned during the pandemic to accelerate improvements to taxpayer service. The People First and e-signature initiatives are two examples of these efforts. Even with these successes, the IRS has acknowledged that there were gaps in service that they are working to correct. Giving the IRS the needed resources will help minimize potential pandemic-related challenges that taxpayers may encounter during the upcoming filing season.

• Underfunding the IRS hurts America's taxpayers and deprives them of the services they deserve. When the IRS is underfunded, it naturally prioritizes its work to ensure that the overall system keeps running. That often means that efforts that ultimately would serve taxpayers better, faster and cheaper are delayed or scrapped entirely. From our perspective, many of the issues that your constituents share with you, such as slower than desired refunds and response times, and incorrect notices, can be fundamentally improved with appropriate IRS funding.

In our experience, today's IRS does not fit the old stereotypes, thanks to the many employees who wholeheartedly believe that improving the taxpayer experience is an essential requirement of their jobs. These public servants want to deliver accurate, timely, fair and compassionate service to our nation's taxpayers, and they are following the Congressional direction to put taxpayers first.

However, ETAAC unanimously believes that the important and paradigm-shifting goals of the Taxpayer First Act cannot be achieved without significant financial investment in technology infrastructure and security. Fully funding the IRS's current year budget request is a down payment on that investment that we strongly encourage Congress to make now.

We expect that we will offer additional budget-related recommendations in our next report to you, scheduled to be issued in June 2021. However, these funding recommendations could not wait.

We are available at your convenience to discuss this matter further with any of you or your staff.

Geno Salo
Chairman

Courtney M. Kay-Decker
Vice Chairperson

Electronic Tax Administration Advisory Committee

cc:
The Honorable Chuck Grassley, Senate Finance Committee Chairman
The Honorable Ron Wyden, Senate Finance Committee Ranking Member
The Honorable Richard Neal, House Ways & Means Committee Chairman
The Honorable Kevin Brady, House Ways & Means Committee Ranking Member
The Honorable Richard Shelby, Senate Committee on Appropriations Chairman
The Honorable Patrick Leahy, Senate Committee on Appropriations Vice Chairman
The Honorable Nita Lowey, House Committee on Appropriations Chairwoman
The Honorable Kay Granger, House Committee on Appropriations Ranking Member
The Honorable Charles Rettig, Commissioner of tile Internal Revenue Service