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JFK would feel right at home in an IRS computer room
Some of the critical technology and software that the IRS depends on is over 50 years old. It would be hard to find any business in the U.S. that is reliant on equipment that dates back to the Vietnam era. Although the IRS states that it constantly updates its technology infrastructure, its core, antiquated tax-processing system was created in the 1960s. In fact, the IRS still uses Cobol, a programming language conceived in 1959 - it's possible that your grandfather could understand the syntax and structure associated with this archaic language; however, the rest of us would need the equivalent of a rosetta stone to figure it out.
Lava Lamps and Bell Bottoms vs. Tiktok and the Cloud
While the IRS is, technologically, stuck in the age of lava lamps and bell bottoms, they are being asked to cope with complex 21st century tax laws and social programs such as ObamaCare, three stimulus payments, child credits and employer Covid tax credits. Additionally, the IRS finds it necessary to employ bilingual agents and translate forms and publications into 25 languages. Today's IRS also finds itself in the position of needing to divert greater dollars in scarce resources to cybersecurity.
The Tax Gap Costs You Money
In large part due to staff shortages and technological shortfalls, the Tax Gap (the amount of revenue the IRS should collect vs. what it actually collects) is approximately $600 billion annually, projected to be $7 trillion over the next decade. The IRS collects over $2 trillion in revenue annually, so the Tax Gap amounts to a whopping 30% of possible revenue. Of course it would be simplistic to say that if this were eliminated your taxes would go down by 30%, but it couldn't help but make somewhat of an impact.
As explained by Bruce Kuczenski of Heartland, "The IRS is on the verge of collapse. Some members of Congress are fixated on the “tax gap"...The IRS could collect taxes better if it were efficient, fully staffed and had up-to-date technology, responsive customer service and reasonable audit coverage. The tax gap will never be eliminated entirely, because it includes the underground economy. Congressional Democrats and Republicans may disagree on whether the IRS’s problem is money or management but they agree that the agency can’t keep deteriorating."
93% of Phone Calls Go Unanswered
As a business owner, if you need to contact the IRS, you may be on hold a long time. Erin Collins, National Taxpayer Advocate told Congress in May 2021"...that at one point during the 2021 filing season, the IRS was receiving 1,500 calls a second. Out of 150 million calls last tax season, 7% were answered. Only 3% of the 85 million callers seeking help with the individual tax Form 1040 reached a representative. Call answering “improved” to 11% for all of 2021." Ms. Collins also reported "...as of May 2021, the IRS had a backlog of more than 35 million tax returns requiring manual processing—including returns filed electronically—and nearly five million pieces of unprocessed paper correspondence. That backlog of both returns and correspondence is now down to 23 million pieces."
If you really need an answer to a tax question, you have a 7 out of 100 chance of getting someone from the IRS on the line. So, instead of even trying, businesses are required to turn to expensive private accounting and CPA firms for help.
As reported by Beverly Moran in the Savannah Morning News, "of the more than 100 million taxpayers eligible for free help, 35% end up paying for tax preparation and 60% never even visit the free websites. Instead of 70% of Americans receiving free tax preparation, commercial companies whittle that percentage down to 3%. The U.S. system is 10 times more expensive than tax systems in 36 other countries with robust economies."
As also reported by Bruce Kuczenski of Heartland, "While the IRS says its budget is under greater strain than ever, there is no explanation why $1 billion appropriated in March 2021 remains unspent. Much of the $250 million annual technology modernization appropriation since 2006 goes to maintain legacy systems, ... A May 2021 report from the Treasury Inspector General for Tax Administration found that 42% of printers and copiers at three IRS tax-processing centers last March were unusable or broken. Because the IRS lacks scanning technology, staffers type in data for many paper returns."
IRS Budget Cuts and Increased Responsibilities
A Yahoo Finance Op-ed, written by Fred Goldberg, John Koskinen and Charles Rossotti, all former IRS commissioners, stated: "The IRS budget today is only 49% the size it was relative to the economy in 1993. Since then, the number of individual tax returns has increased by 38% and business returns by 84%." Besides ObamaCare, mentioned above, the IRS also now has responsibility for the 2021 American Rescue Plan Act.
The IRS Workforce Down 30%
The IRS workforce relative to its workload is completely out of balance. The IRS lost 33,000 (30%) of its skilled workforce from 2010 to 2020. At the end of 2021 the IRS had 83,265 employees (down from 94,000 a decade ago). The vast majority of these employees are older. Since then, despite IRS efforts to hire more employees, the workforce has continued to shrink. The agency recently advertised 5,000 openings but has only filled 179. In January, 2022, the Office of Personnel Management raised the minimum pay for IRS and other federal employees to $15 an hour. New employees take years of training and experience to become fully effective.
Tax collectors have been unpopular since biblical times. But any modern society with a dependable and fair social safety net and democratic institutions must be property funded. As much as it pains all of us to pay our taxes, if we want our country to flourish, it's time to support the iRS and give unto Caesar what is Caesar's.
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