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COMMENTARY

Commentary: A call for a more balanced assessment of the IRS's performance

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The IRS received an astounding 282 million phone calls during fiscal year 2021. With fewer than 15,000 employees available to answer the phones, there was one employee for every 16,000 calls.

The Inflation Reduction Act of 2022’s allotment of $80 billion to the IRS has generated considerable political heat, with dissenters decrying the IRS’s performance record as an indicator that it can neither manage nor deserves additional funding. Specific criticisms of the IRS’s performance have included significant breaches of taxpayer data, a 1-in-9 success rate in answering phone calls, a backlog of as many as 35 million unprocessed tax returns, and billions upon billions of dollars of errors detected in Treasury Inspector General for Tax Administration (TIGTA) audits. Critics are also disturbed that taxpayers are being held accountable for errors, when the IRS also makes critical errors without any known repercussions.

We cannot disagree that many aspects of the IRS’s performance record are troubling. However, we do disagree that it is useful to vilify the IRS, as many critics recently have, and to argue that Congress has erred in granting additional funding to the IRS. Unfortunately, finger pointing, lashing out, and holding just one party wholly to blame as “the enemy” is increasingly the norm in our society. This practice solves nothing; it makes the problem worse. As the management expert W. Edwards Deming pointed out about three quarters of a century ago, if you want to fix a problem, you must look at the system that caused the problem. He taught us very well that blaming is not productive.

Our “tax system” consists of a lot more than just the IRS. Consider that the federal tax law is unwieldy. Per Iris Reading, by 2020, the average person would have needed 14 weeks just to read the Tax Code and other official interpretations. Former Congressman David Camp once remarked that the length of the Tax Code was 10 times that of the Bible without any of the good news. Despite the tremendous complexity of our tax system, formal education in taxation is limited to the few persons in college who take courses in taxation or who receive on the job training, leaving most of the 160.7 million taxpayers in the US to basically fend for themselves.

Some recent criticisms of the IRS also lack context obscuring its performance record. For example, per the Taxpayer Advocate Service, the IRS received an astounding 282 million phone calls during fiscal year 2021. With fewer than 15,000 employees available to answer the phones, there was one employee for every 16,000 calls. Given that sobering data, it seems like a minor miracle that the IRS was able to answer 1 in 9 phone calls. Furthermore, the funds allocated to hiring in the Inflation Reduction Act are mainly to allow the IRS to replace the employees expected to leave in the next six years, not to double the size of the IRS. In addition, the need for IT services exploded due to increased electronic filings, Affordable Care Act mandates, cybersecurity threats, and the Tax Cuts and Jobs Act of 2017, but IT staff sizes have remained fairly steady overall. The IRS’s recruiting efforts in IT also are likely to be hampered by deficiencies in entry-level salaries, which almost certainly prevents the IRS from being competitive in hiring and being able to correct its very challenging and antiqued IT system.

Unfortunately, fixing our tax system is hardly a simple task. But there are a few places we could start. First, we have to educate our citizens about how to file their own taxes. This education needs to be mandatory and appropriately designed for all high school and college students. Although it is unreasonable to expect U.S. taxpayers to become tax experts, formal education in taxation is likely to reduce errors and dependencies on the IRS. Second, when passing new tax legislation, Congress has to be more mindful. Although legislation may be well intended, what is the point of passing voluminous tax bills that cannot be made operational?

Finally, we must stop vilifying the IRS. The IRS has an essential purpose and, yes, it provides a service for U.S. citizens. Vilifying the IRS creates an enormous disincentive to work for the IRS. Given the importance of the IRS and the challenges it faces, we need our best, brightest, and most ethical to be motivated to work for the IRS. We also need IRS workers to have adequate resources. Let’s start telling the whole story about the IRS and about the trouble spots in our federal tax system.

Simms, Warren, and Li are assistant professors of accounting and Chatham is an associate professor of accounting at Radford University. Dushi is director of Radford University’s Governmental and Non-Profit Assistance Center. Simms serves as on the Journal of Forensic and Investigative Accounting advisor board and as faculty advisor to Davis Women’s Network. Warren is retired as an IRS Criminal Investigation Special Agent.

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