How IRS Funding Deficits Harm Accountability Efforts
by Sophia Lam
As April approaches, the IRS has warned taxpayers that current staffing shortages and backlogs will translate to “another frustrating filing season,” as there is currently only one IRS staffer available for every 16,000 incoming calls. This frustrating inaccessibility to information is also felt by watchdogs like CfA who rely on IRS databases to access up-to-date filing information on the thousands of politically engaged non-profit organizations around the country.
As of February 2022, the IRS still has not uploaded many organizations’ 2020 Form 990 filings, which contain a wealth of information on these organizations’ donors, revenue, and grantees. These forms are crucial for understanding and unravelling the complex flow of money that goes between organizations, how executives are paid, and what consultants are reaping in paydays. The information backlog is particularly notable considering the delayed period covers the height of spending leading up to the 2020 election.
This current crisis is not only a consequence of Covid. Although this backlog is far higher than what the IRS typically faced before the pandemic, the agency’s struggle to keep up is nothing new. While the number of individual tax returns increased by 19 percent since 2010, IRS staffing is down 17 percent. To alleviate this strain, the Biden administration proposed an additional $80 billion over a decade for the IRS to increase its staff, technology, enforcement, and efficiency.
In addition to harming transparency, the lack of IRS funding and subsequent staffing shortage has allowed rampant tax avoidance, which costs the nation far more than the suggested budget increase. In 2017, the IRS had only 9,510 auditors, the lowest levels since 1953 when the economy was a seventh of its current size. Moreover, while the number of millionaires has nearly doubled since 2012, tax audits have dropped by 72% as of 2020. The lack of auditing disproportionately benefits businesses, as they are more likely to misrepresent their income. The IRS estimates that 56 percent of sole proprietors misrepresent their income compared to just one percent of taxpayers that receive wages and salaries, most of whom have employers that withhold income and payroll taxes. An increase in funding will allow the IRS to hire more auditors at competitive salaries and conduct more audits to crackdown on tax evasion by high-earners and large corporations.
Moreover, a staffing increase would increase the overall efficiency of the IRS. Currently, over 75% of calls never get through to an IRS employee. This leads frustrated taxpayers to take their best guess, which leads to fines and more work on the IRS’ part to identify and correct these errors. Increased funding would enable the IRS to finally invest in the required technologies and personnel to implement their plans to set up call-back technology and online assistance. This decreases the amount of confusion over tax filing, enabling the IRS to operate more efficiently and dedicate more time to auditing high-income tax evaders. It’s important in any discussion of IRS funding to understand that, according to studies, an $80 billion increase in funding over 10 years would net an additional 700 billion in tax revenue over the next decade.
The IRS has ambitious plans to modernize and increase its capabilities. Unfortunately, until it receives its much-needed investment so that it can update its technology and expand its staff, the IRS will remain unable to hold tax dodgers accountable, and provide accessible up-to-date filing information that serves as a critical tool for downstream accountability efforts.
Campaign for Accountability is a nonpartisan, nonprofit watchdog organization that uses research, litigation, and aggressive communications to expose misconduct and malfeasance in public life and hold those who act at the expense of the public good accountable for their actions.