WASHINGTON -- The coronavirus pandemic has magnified critical weaknesses at the Internal Revenue Service as many taxpayers face economic hardship, with old technology and short staffing still delaying millions of tax returns and stimulus checks, a new report found.
The tax agency blasted out most of the more than 160 million stimulus payments Congress mandated starting last March and managed to process roughly that many tax returns to electronic filers last year -- even as the virus sidelined much of its workforce, the National Taxpayer Advocate's annual assessment released Wednesday said.
But while the IRS in most cases "can effectively handle whatever it can automate," it does not automate a lot. And its heavy reliance on paper, outdated methods of communicating with taxpayers, and information technology systems that date to the 1960s resulted in delayed refunds for paper filers and missing or inaccurate stimulus payments, auditors found.
The overwhelmed agency, challenged now by a new tax season and another round of stimulus payments, failed to set up procedures to resolve many of these issues. As of late last year, 7.1 million individual and 2.3 million business returns were still unprocessed, the report said.
Among the most acute customer service lapses in 2020: Employees answered just one in four of more than 100 million calls to the IRS' toll-free telephone lines, leaving the rest unanswered or directed for automated responses, the report found. And for months, taxpayers who wanted to consult an agent in person could not, since in-person assistance offices were closed.
"While the IRS took some steps to keep the public informed about covid-19-related delays, particularly later in the year, taxpayers often did not understand what was happening with their tax returns, refunds, balances, or [stimulus payments]," Taxpayer Advocate Erin M. Collins wrote in her report to Congress.
"For much of the year, relatively limited information was released, and comments made by IRS officials often were incomplete or misleading," Collins wrote.
She predicted that the challenges created by the pandemic would continue through the 2021 filing season "and possibly for months longer."
The Taxpayer Advocate Service is an independent organization within the IRS that advocates for taxpayers.
Collins' 278-page report offers a detailed description of how one federal agency, already weakened by a decade of funding cuts by Congress, has navigated through a pandemic that continues to shut down and slow many of its functions.
Paper tax returns and correspondence from taxpayers sat unopened in trailers in U.S. Postal Service parking lots for months while IRS offices were closed.
While thousands of IRS employees have been able to work remotely since last spring, large swaths of the agency's customer service workforce have not. That's because it had not switched phone operators and other employees to technology platforms that allow them to answer phones from home and send secure emails to taxpayers.
Agency spokeswoman Jodie Reynolds said in a statement that the IRS "remains committed to continue to do as much as it can, subject to budget constraints, to provide meaningful services to all taxpayers, whether in-person, on the phone or online."
Sen. Ron Wyden, D-Ore., the incoming chairman of the Senate Finance Committee, said in a statement that the IRS needs "rebuilding" after a "decade of Republican budget cuts" so it can crack down on wealthy tax cheats. "I appreciate the Taxpayer Advocate's focus on the need to restore critical funding and staffing," he wrote.
electronic filing urged
On Tuesday, in guidelines to the public for the upcoming tax season, the agency said it anticipates "heavy call volume on its telephone assistance lines to continue into the filing season," and it urged taxpayers to file returns electronically, sign up for direct deposit and provide up-to-date banking information for their refunds.
About 16 million taxpayers file paper tax returns, and most receive refunds that in recent years have averaged $3,000, the report says. But because the IRS could not fully staff its mail facilities, some taxpayers have waited six months or longer for their refunds.
With with IRS having overburdened phone lines and an online portal many customers had trouble navigating, people were left in the dark about their payments as the pandemic dragged on. When taxpayers did reach an agent by phone, the agent had no access to their individual accounts.
The report predicts that some of these problems will likely continue this year because of a cascading effect. Taxpayers have 2019 tax returns and refunds still outstanding. And paper returns will continue to proceed more slowly than usual because of covid-19 social distancing guidelines in processing centers.