The Taxpayer Advocate Service (TAS) is part of the Internal Revenue Service (IRS). It was shut down along with some other parts of the IRS and other agencies. The annual TAS report was delayed for a month as a result.
The report states:
The five weeks could not have come at a worse time for the IRS—facing its first filing season implementing a massive new tax law, with a completely restructured tax form. As I outline below, the IRS is entering the filing season inundated with correspondence, phone calls, and inventories of unresolved prior year audits and identity theft cases.
A discussion topic in the report is the permissible scope of IRS activities. Under the Anti-Deficiency Act, federal funds may not be spent in the absence of an appropriation unless otherwise provided by law. One exception is for “emergencies involving the safety of human life or the protection of property.” The IRS Office of Chief Counsel has interpreted the “protection of property” exception to apply only to the protection of government property and not to a taxpayer’s property.
According to the Taxpayer Advocate, when IRS issues a levy to a bank, the bank must freeze the taxpayer’s account for 21 days. If the levy has not been released, the bank must turn the funds over to the IRS.
The Internal Revenue Code requires the agency to release a levy if it “is creating an economic hardship due to the financial condition of the taxpayer.” The IRS’s legal interpretation of the Anti-Deficiency Act would not permit levies to be released even in extreme cases, even if the levied funds are necessary “to pay for basic living expenses [or even] a life-saving operation,” according to the TAS.
If the IRS does not change its interpretation of the Anti-Deficiency Act, TAS recommends Congress amend the law to ensure that taxpayer protections and rights enacted by Congress are still available when the IRS takes enforcement action against a taxpayer during a shutdown or just before a shutdown.
Shutdown Impact on Taxpayers and the IRS
The IRS opened the 2019 filing season as soon as the shutdown ended. The IRS telephone service during the first week of the 2019 filing season and the first week of the 2018 filing season shows taxpayers are having more trouble getting answers to tax questions this year.
In the first week of the 2018 filing season, IRS answered 86 percent of calls routed to an employee with an average wait time of about four minutes. This year, during the same time period, the IRS only answered 48 percent of its calls with an average waiting time of 17 minutes.
By January 24, more than five million pieces of mail needed to be processed. The agency had 80,000 responses to the FY2018 Earned Income Tax Credit audits that had not been addressed and 87,000 amended returns waiting to be manually processed.
TAS Thanks IRS Employees
The TAS report notes that “Most IRS employees experienced financial challenges as a result of missing two paychecks. Yet when the shutdown ended, IRS employees returned to work with energy and generally hit the ground running. The IRS faces many challenges as an agency – and this report documents many of them – but the dedication of the IRS workforce is a notable bright spot.”
1960’s Computer Technology
The IRS computer systems holding official taxpayer accounts are the oldest in the federal government. Taxpayer information is stored in more than 60 separate systems. The IRS has no wide overview of taxpayer data. Without a case selection system, the agency does not know if it is focusing on the right taxpayers or the right issues in its outreach, audit, and collection activities.
In 2018, the IRS had a systems crash on the last day of the tax-filing season. The crash raised the possibility of a systems collapse. While that is a possibility, the IRS performance is limited by these old systems. Without replacing the systems, problems will continue increasing. These problems may not make headlines, according to the TAS, but will have increasingly harm on taxpayers and impair the federal government’s revenue collection.