IRS Funding: How the Child Tax Credit and Tax Season Show the Importance of the IRS

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If you have a question for the IRS or still haven’t seen your tax refund — maybe even from 2020 — get in line.

The Internal Revenue Service has seen its workforce decline by 17% since 2020, while its workload has reportedly increased by 19%. The much-maligned agency has taken a bit of a delay.

Treasury Department Assistant Secretary Wally Adeyemo recently spoke to NPR about some of the agency’s ongoing struggles. “Last year, the IRS received 230 million phone calls and only had 15,000 people to answer those calls, which meant that each person had to answer 16,000 calls.”

The Washington Examiner said the IRS is seeking $80 billion in funding to more than double its staff and improve its efforts to catch tax cheats. The House approved the proposal, but the Senate balked.

If you’re tempted to dismiss the challenges facing the IRS as unimportant, it might be worth considering the ways the tax collection and reimbursement agency helps families and communities thrive.

“Dysfunction matters not only because ‘taxes are the lifeblood of government,’ as a Supreme Court justice wrote in 1935, but also because the IRS administers benefits in the form of tax credits. taxes that are especially vital for Americans who are struggling financially amid historic inflation and the ongoing pandemic,” Orion Donovan-Smith wrote for the Spokesman-Review. “Families who received monthly payments of up to at $300 per child in the second half of 2021, for example, cannot get the other half of that child tax credit until their tax returns are processed.”

Among other reasons, families should ensure that the IRS works as intended:

  • The United States cannot run a functioning government without the IRS, according to the Washington Post, which considers taxes collected to be crucial in funding government operations. “Without the IRS collecting taxes and enforcing the tax code, the U.S. federal government would very quickly collapse into utter dysfunction,” the article notes.

No taxpayer money means no federal jobs, no community block grant transfer money, reduced public health spending, less Alzheimer’s and cancer research, and no camping and games in national parks, among millions of other taxpayer-funded things that are largely taken for granted.

  • Research from the University of Maryland and New York University published in The Washington Post suggests that you can appeal to different partisan interests to gain support for IRS funding. For Democrats, the message could be the role the IRS plays in reducing inequality. For Republicans, the message could center on how the IRS helps reduce federal budget deficits. “One estimate suggested that better tax enforcement could have eliminated about three-quarters of the 2019 federal budget deficit,” the Post noted.
  • Support for Ukraine in the form of sanctions relies in part on a robust IRS. Most sanctions against Russia, Russian oligarchs and others are determined by the Treasury Department. But it’s specifically “the IRS’ investigative arm’s expertise in complex money laundering and tax evasion schemes” that gives the federal government the skills to apply penalties, according to CNN. And polls show that matters to many American families.
  • Some of the direct assistance given to families during the COVID-19 pandemic has reached citizens’ wallets through the IRS. This agency not only handles tax refunds, but the Child Tax Credit (including the extended version that was paid monthly directly to families in the last half of 2021) and the Earned Income Tax Credit . Other direct aids require tax returns to determine economic eligibility, including some forms of student aid for students.

Dimensions of the crisis

As of April 18, the 2021 tax filing deadline, the IRS has received more than 130 million tax returns, collected 95% of the revenue it would receive to fund the US government, and paid out more than $220 billion. dollars in refunds and credits, according to Natasha Sarin, adviser for tax policy and enforcement at the Treasury Department, in a Treasury report.

She called the tax deadline that just ended “an inflection point in what has been the toughest filing season in the agency’s recent history.”

The pandemic and the IRS’ underfunding have created enormous challenges, she said.

The agency is pushing for $80 billion in funding over the next decade — a request funded in Biden’s ‘Build Back Better’ plan, which passed the House and is stalled in the Senate, possibly permanently. The administration said the investment would yield $700 billion in revenue over 10 years in the form of collected taxes that are currently unpaid, according to the Washington Examiner.

Among the challenges for the IRS, tax season has started with the agency still grappling with a backlog of 20 million tax returns from the previous year, The New York Times reported, noting complaints about a technology “obsolete”.

“Ours is a tax system that takes the average American 13 hours to file. It is a tax system with a gap between what is owed and what is collected that is estimated at $600 billion a year, or about 3% of GDP on an annualized basis, with more than 30% these unpaid obligations going to the wealthiest 1%. . It’s a tax system where torn paper returns are literally pieced together with tape,” Sarin said.

The IRS says it has done a tremendous job so far this tax season, processing nearly 100 million of the 103 million tax returns it has received, even though its computer system is half a century old.

Adeyemo told NPR that a big reason the IRS needs more money is to make it easier for low- and middle-income Americans who have simple taxes to file for free and to speed up processing so that people get their refunds faster.

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