The “returns” are in from the 2023 tax season, and everyone’s least favorite federal agency has made actual progress.
Using funds from the Inflation Reduction Act of 2022, the IRS has improved its famously miserable customer service, upgraded some of its antiquated technology and breathed a little life into its moribund efforts to snare wealthy tax cheats.
The agency responsible for collecting federal taxes still has a long way to go, but the signs are promising – at least for those of us who believe in enforcing the law. Given that as much as $1 trillion a year in tax revenue goes uncollected, every law-abiding American should be rooting for the IRS to ensure that all taxpayers meet their obligations, as fairness requires.
Unfortunately, some extremists have decided it’s in their interests to demonize the IRS and starve it of resources. In the process, they’re enabling fraud and, in effect, making a mockery of honorable citizens paying what they owe.
First, the good news. Even with the relatively small increase in resources available to it this year, the agency hit some impressive milestones. Through the end of the filing season, the IRS said it answered 3 million more calls than last year, cut phone wait times to three minutes from 28 minutes and served 140,000 more taxpayers in person, staffing 35 Taxpayer Assistance Centers across the country.
There shouldn’t be anything controversial about an agency giving Americans the answers they need to better understand their obligations.
The agency also said it used the additional funding to digitize 80 times more returns than in 2022, through the adoption of scanning technology. Scanners were developed in the 1950s and by the 1990s had become household items. The fact it took decades after that for the IRS to fully deploy them hints at the impact of massive budget cuts.
This year, the agency said it launched two other digital tools, enabled a direct-deposit refund option for taxpayers with amended returns and cleared a backlog of 2022 individual tax returns with no errors, meaning they should have been processed a lot faster – had the agency’s enemies in Congress not worked so hard to bog things down. By 2028, taxpayers will be able to securely file all documents and respond to notices online, finally giving the IRS capabilities that big financial institutions rolled out years ago.
The IRS also said it is making some early inroads on a problem that Congress created, seemingly by design. Budget cuts have made it impossible for the IRS to keep up with wealthy taxpayers who use sophisticated methods to hide their incomes. For years, the agency has lacked enough expert staff to deal with high-dollar tax evasion and delinquency.
That may be starting to change. The IRS recently uncovered personal retirement schemes that exploited treaty rules between the U.S. and the European island nation of Malta to improperly claim exemptions. Similarly, the IRS said it recently identified about 100 high-income individuals faking residence in Puerto Rico to take advantage of favorable tax rules for the U.S. territory. The agency is pursuing criminal charges against some of those alleged tax dodgers. As well it should.
The IRS also is starting to catch Americans who make millions and simply don’t file their taxes, or delinquent filers who tie the agency in knots to delay paying what they owe.
While not explicitly endorsing criminal conduct, some in Congress have enabled it, using phony excuses to rile up the many Americans who don’t like the taxman, and ensuring the agency is incapable of auditing the rich.
Far-right media outlets have piled on myth after myth, like “Democrats would hire 87,000 new IRS agents.” No, most of those new hires would replace existing staff, and most would not be agents. Another favorite: “The IRS targeted the tea party.” No, the IRS investigated the abuse of nonprofit status by political groups of all stripes. (Ironically, two IRS employees were star witnesses in the latest House Republican hearings about alleged delays in the investigation of Hunter Biden, the president’s son.)
And how about “New IRS funding will be used against poor- and middle-income taxpayers, because those groups are audited at much higher rates”? No, again. The new money has been directed to correct that imbalance by giving the agency resources to audit those with higher incomes.
It’s also a phony article of faith that small-business owners, farmers and other salt-of-the-earth, hardworking Americans will become IRS targets, because the elite will remain, as they are now, protected by platoons of lawyers and accountants. This is hardly an excuse to starve the IRS of the resources it needs to go after big-dollar scofflaws. And it’s an especially cynical argument given that some on the far right have worked hard to increase tax-compliance requirements for poor people while writing sweetheart provisions into the tax code for the wealthy.
One of the most remarkable wake-up calls came in June 2021, when the nonprofit journalism group ProPublica published a trove of leaked tax records that revealed how the richest Americans can avoid paying anything – legally.
Amazon’s Jeff Bezos paid not a penny in federal income taxes in 2007 or 2011, for instance, and Tesla’s Elon Musk paid nothing in 2018. Billionaires Michael Bloomberg, Carl Icahn and George Soros also managed to pay nothing in various years. This is an unfair system that needs correcting – and fixing it will more than pay for itself. Republicans should appreciate that.
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