Natasha Sarin, the Treasury Department’s counselor for tax policy, said in a release that Tax Day, which falls on Monday, represents an “inflection point” and that the IRS has been dealing with the “most challenging” tax filing season in recent history.
She said that while the Internal Revenue Service has collected more than 130 million tax returns and paid more than $220 billion in refunds and credits, the agency is underfunded and “massively” understaffed.
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“The IRS knew walking into this filing season that it did not have the workforce or technology in place to serve the American people the way they deserve — to pick up the phones when taxpayers call, to help them access all the credits and benefits to which they are entitled, and to ensure that each and every taxpayer receives their refund quickly,” Sarin said.
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“The IRS has a plan in place to get through its backlog of unprocessed returns this year. But so long as funding remains insufficient, the system will be at risk of these kinds of failures and Americans won’t have the kind of service they deserve,” Sarin said.
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The Treasury is asking Congress for $80 billion over the next decade. The request was part of President Joe Biden’s Build Back Better spending plan, which fell apart when it became clear that key centrist Democrats would not end up voting in favor of the ambitious proposal.
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The Biden Administration has said the IRS needs the funds to hire more staff and said the cash infusion would give it more power to crack down on those who are dodging taxes. The Administration has asserted that it can raise $700 billion in revenue over 10 years through that $80 billion investment alone.
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The Congressional Budget Office found that if Congress approves the $80 billion, it will grow the IRS’s budget by more than 90% by 2031. Additionally, the spending is expected to double the agency’s staff.
Sarin also said that more funding for the IRS would help close the country’s tax rift, which is the difference between taxes that are owed and collected.
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Deputy Assistant Secretary for Tax Policy Mark Mazur testified last year that there will be a $7 trillion tax gap over the next decade. He told Congress that the IRS assessed a $381 billion net tax gap between 2011 and 2013.
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“If we take those numbers and extrapolate them to today, assuming that the estimated tax gap grows with the economy, the estimated tax gap would be around $580 billion for 2019,” Mazur said. “Over the coming decade, if we use the same sort of estimates, the gross tax gap is projected to total $7 trillion — obviously, that is a lot of money.”