By Deputy Secretary of the Treasury Wally Adeyemo
Today marks the beginning of tax filing season—the annual period during which Americans file their tax returns. The tax dollars collected by the Internal Revenue Service (IRS) each year enable the federal government to serve the American people by providing essential services and benefits. From the Social Security payments that support our seniors to paying and protecting our troops to the climate investments that will help us transition to a net-zero economy, the IRS’s ability to collect revenue undergirds the provision of the services on which all Americans depend.
The IRS has faced significant challenges in recent years, driven by chronic underinvestment in its people and technology and exacerbated by the COVID-19 pandemic. As a result, the IRS has been unable to answer the high volume of taxpayer phone calls they receive, and families and businesses have seen their refunds delayed due to slow processing. Despite these challenges, IRS employees have continued to rise to the occasion, delivering economic lifelines to hundreds of millions of families and small businesses that kept people afloat during the depths of the pandemic.
The Inflation Reduction Act (IRA) has provided long-term resources to tackle these challenges head-on. Thanks to President Biden, the IRA provides additional funding to modernize the IRS—to hire the staff needed to give Americans the level of service they deserve and to build the technology and systems needed to deliver a swift and seamless tax experience. Of course, these changes will not take place overnight. Due to chronic underfunding, the IRS’s workforce remains the same size as it was in the 1970s, and the agency has fewer auditors than at any time since World War II. At the same time, the U.S. population has increased by more than 100 million since 1970, and the economy and tax code have only grown in complexity. What’s more, the IRS’s technology relies on a programming language that was created in the 1960s. Fully rebuilding the IRS will take time.
Some of these changes, however, are already underway and will result in noticeable improvements for Americans during this year’s filing season. Together, these reforms will result in faster processing of returns and quicker distributions of the credits and benefits that are vital to so many Americans.
To start, we’ve hired 5,000 new customer service staff to answer the IRS’s phones and help ensure taxpayers get the help they need. The IRS answered too small a share of the total number of calls they received last year. These 5,000 new hires will ensure that changes and help address the continued elevation of call volumes we’ve experienced over the past two years.
Ultimately, when it comes to customer service, our goal is to ensure that taxpayers can get their questions answered by the IRS as quickly as possible. Last fall, Secretary Yellen set out a goal of an 85 percent level of service. In the past, the IRS has assessed its level of service using a metric that only captures calls answered by customer service representatives. But today, when you seek customer support from a company or business, you typically have the option to speak to a customer representative or use automated support if it will better meet your needs.
The IRS has made significant improvements to its automated services in recent years and now gives taxpayers the same option—offering automated phone and chat support, as well as live phone assistance. We look forward to serving millions of taxpayers with these automated options, and one way we will measure our ability to meet taxpayers’ needs is by looking at the overall level of service provided by our customer service representatives and automated support systems together. The IRS will continue to report data on the number of phone calls answered by customer service representatives, as well as data on automated assistance.
We’ve also taken steps to fully staff the Taxpayer Assistance Centers that provide in-person support to Americans nationwide. These 361 centers located across the country offer free tax help—to address complex tax questions that may be challenging for individuals or small businesses to handle on their own, to help tax filers without a Social Security Number apply for an Individual Tax Identification Number, or to assist those who may face a language barrier in filing their taxes. As of December, the IRS had hired or selected nearly 650 additional people to provide support to the American people at Taxpayer Assistance Centers this filing season.
In addition, more than 100 Taxpayer Assistance Centers nationwide will host monthly Taxpayer Experience Days to provide face-to-face help on Saturdays—when most taxpayers’ schedules allow them to visit these centers. Overall, we are on track to meet Secretary Yellen’s goal to triple the number of Americans served at these centers. These in-person sessions are a vital service for many taxpayers—especially low-income households—helping them receive benefits they count on and for which they are eligible, like the Earned Income Tax Credit and many others.
We have also made meaningful progress in streamlining the ways that taxpayers are able to respond to notices from the IRS. In the past, when taxpayers received an IRS notice for things like documentation verification, they had to respond via mail—there was no electronic option. Today, that is no longer the case. Last year, the IRS set an ambitious goal to create an online response option for seven of the most common notices that taxpayers receive. They will exceed that goal at the end of this month, with online response capability available for ten of these notices and more to come as technology improvements are implemented.
The ability to respond to notices online is not the only place where we’ve taken steps to move the IRS into the 21st century. The IRS will soon roll out a new digital option for small business owners filing 1099 forms. Millions of small business owners prepare their own taxes, rather than hiring professional tax preparers. We have consistently heard from this group that online filing for 1099s will make a meaningful difference for them, saving time and money.
In addition, the IRS is moving forward with plans to automate the scanning of individual paper returns, turning them into native digital copies at the outset of the filing process. Since Secretary Yellen’s promise to automate this process last fall, the IRS has successfully initiated the work to scan nearly 100,000 returns and is working to expand this program to address a large number of the paper returns sent to the IRS every year.
Finally, we’re proud that in the U.S., we have a system where the vast majority of people pay their taxes. However, the IRS has historically lacked the resources to effectively audit wealthy and high-income individuals, whose audits are more complex and take more time. These individuals are responsible for a disproportionate share of unpaid taxes, depriving the American public of funds needed to pay vital services and benefits. In total, the gap between taxes owed and taxes paid stands at roughly $600 billion every year; the top 1 percent alone account for $160 billion of this gap, nearly 30 percent. The IRA will help to change that, providing the IRS funding for the tools and personnel needed to go after wealthy tax cheats and ensure they pay their fair share. At the same time, Secretary Yellen has directed that these resources will not be used to raise audit rates for households making less than $400,000, relative to historical levels.
Of course, our work is far from over. The resources provided by the IRA will support a top-to-bottom modernization and transformation of the IRS that will continue long after this filing season. But even in the five months since the IRA’s passage, we have made meaningful progress toward our goals that will result in tangible improvements for taxpayers this filing season.