Internal Revenue Service (IRS) Commissioner Charles Rettig Testifies before Oversight Committee Regarding 2021 Filing Season. If you are not aware of some of the relevant impacts from the bill H.R.1319 (American Rescue Plan Act 2021 or ARP), some of the material was present in the hearing. The stimulus payments and increase of Unemployment Insurance Benefits (UIB) brought by the ARP have an impact on taxes, but outreach programs hope to educate taxpayers about how to approach the benefits of the bill signed.
Range of Concerns
The commissioner of the IRS gave a review of it’s main concerns this filing season from the Stimulus package that include: the Emergency Impact Payments (EIP), tax return backlogs, personnel needs, trends and agency’s budget, technology modernization efforts, relevant services for vulnerable communities, EIP and UIB recoveries. A concern was expressed whether the 45th president’s tax return is a priority in this time. The draft process of the recent stimulus package includes some input by representatives of the IRS that regard the ability to administer the payments. A good amount of effort was made to see that The IRS was given the instruments needed to administer tax refunds and EIP payments as much as possible.
2021 Filing Season Challenges
Later filing season start did not add delay to claimed EITC and Child tax credits issued on February 16th to eligible taxpayers with no issues with their return. High call demand, and handling time, greater call complexity, and previous staffing requests responses are some of the challenges during normal business hours, but the commissioner assures staff is happy to work and are working hard to get the job done. In regards to the backlog, hiring efforts can not on-board and train personnel in a timely manner where they may be able to make an impact on the backlog. When asked about the Backlog, the commissioner expresses the hope to be finish the backlog by the summer, that hope depends on many factors. An example was given to show impact by COVID-19, the lone Error resolution service, location in Kansas city; saw an increase in turnaround times being 3 – 5 business days that now extends from 10 to 14 days. Most of agency is working dual shifts and mandatory overtime.
Communities
2.2 million immigrant children are eligible for payment, the commissioner was asked how the IRS plans to reach them. The commissioner highlights that the IRS has data from tax returns. Recipients of EIP 1 and 2 without tax activity could use the non-filers portal. The Commissioner presses taxpayers to use avenues such as Free file online, Volunteer Income Tax Assistants program partners (VITA), Low Income Tax Centers (LITC) because a tax return needs to be filed to determine and trigger eligibility for EITC, CTC, and other payments . Otherwise, the IRS is engaged with over 11,000 community organizations and is using every outreach opportunity.
Foster Youth were noted as not receiving non-filer verification forms that are needed when filing for student aid. If a foster youth who was eligible should file a tax return and claim the Return Recovery Credit (RRC). The filer would then receive the eligible payments if they are not on someone’s tax return as a dependent, the IRS plans to have a recovery for this situation as well.
A Federal reimbursement was provided to US territories for associated costs of providing the EIP and provisions for permanent refunds for the EITC and Child Tax Credit. The commissioner notes that disbursement would be facilitated with Treasury and Office of Tax Policy. The IRS in general through COVID-19 greatly increased it’s ability to use virtual resources to better be available for tax payers in vulnerable communities, different time zones and areas with less personnel. Young military personnel, citizenship/language-challenged individuals may have been targets for preying tax filers. The IRS has personnel who run operations to uncover these situations of preying tax filers.
Modernization Efforts
In regards to the under-funded 3 years passed of a 6 year Business Modernization Plan; the agency works towards the goal noting significant budget constraints. Remote Online Notarization is a user friendly service that had been used for document submission for IRS and UIB, the IRS will like to make this and other electronic tools more available to use. Ability for using online resources is now present unlike prior to COVID-19, a VITA site in a particular state can now be able to assist a tax payer in the Virgin Islands with ease. The IRS has moved from 45% to 16% on out-of-date hardware due to significant funding due to covid. Off-the-shelf or tailor made programs are championed from the IRS’ interest in the private sector.
Current Tax Issues
In regards to EDD fraud and taxes; the commissioner advises not to file amended returns if returns are already filed.
If not yet filed, only report the benefits you collect or receive on your tax form and then report to EDD the instance of fraud. The IRS is working with the Employment Development Department but need defrauded claimants to report the instance of fraud to their states UIB. The commissioner said we will support legislation that would assist in eliminating abuse of Conservation/syndicated Easement. Unemployment Modernization Act is one of many attempts at bring better security and operation updates to the UIB systems across many states. The ARP Act includes for earners under $150,000, an exclusion of $10,200 of Unemployment Insurance Benefits per person. EIP and UI compensation recoveries are in the future.
The commissioner expresses support for legitimate conservation easements, but in regards to the abuse or syndication easements, would like to see legislation to act on abuses in an injunction or criminal context.
The commissioner asserts their is not a two tier tax system in regards to pursuing more low income tax audits versus higher income tax audits. IPIRA is a federal bill that requires more audits of qualifying Earned Income Tax Credits tax filings. Highlights of difference between low income tax filings being smaller and easier to audit than larger more complex tax activity filings. A normal Tax return can be audited in 3 years. Since 2010 the IRS shed 15,000 personnel for enforcement that impacts the ability to audit high earner returns with gross income over $10 million, at 2010 the ability was at 23% which fell to between 6 and 8% in 2019’s statistics. Enforcement benefits from experienced collectors that are Field Revenue Officers and Field Revenue Agents that are experienced examiners when it comes to enforcement of penalty and corrective tax collection. The commissioner explains that this Monday, IRS will release a report that specialized agents matter as much if more than amount of personnel for complex tax activity, like offshore matters. Tom Suozzi advocated to provide more funding to IRS in hopes in brings more money. The commissioner agrees that when properly staffed the IRS has a good Return on Investment. Many pages in the Statistic books show when IRS receives adequate funding; the amount of penalties and corrective collection of owed tax dues exceeds the increase in funding.
Delay for filing Federal taxes is extended till May 15th from April 15th for individuals, not all entities. Please note State deadlines and quarterly submissions are not changed. The commissioner bears in mind, large wealthy businesses not sending payments in order to invest what would be the payment
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