The IRS has made significant improvements in taxpayer services thanks to the Democrats' Inflation Reduction Act, as reported by an independent watchdog. Despite these advancements, the agency is still facing challenges in processing claims related to a pandemic-era tax credit program and resolving identity theft cases.
The report highlighted that delays persist in addressing claims from taxpayers whose identities were stolen by fraudsters, with the average resolution time increasing from 19 to 22 months in 2024. Additionally, there have been prolonged delays in resolving Employee Retention Credit claims, which were intended to assist businesses in retaining employees during pandemic shutdowns but were exploited by scammers.
The IRS temporarily halted accepting claims for the Employee Retention Credit due to concerns about fraudulent applications. However, as of October 26, 2024, the agency still had a backlog of approximately 1.2 million claims, with many pending for over a year.
IRS Commissioner acknowledged the progress in taxpayer service but identified identity theft as a significant service gap. The agency is allocating more resources to address the issue and streamline the resolution of identity theft cases.
The taxpayer advocate recommended several measures to enhance IRS operations, including expanding the U.S. Tax Court's jurisdiction, providing more financial support to the Low Income Taxpayer Clinic program, and ensuring timely processing of refund or credit claims.
Funding plays a crucial role in IRS improvements, with multiyear funding from Congress enabling faster service and improved phone response times. However, there are concerns about potential budget cuts that could impact taxpayer services and information technology.
Treasury Department officials are urging Congress to release an additional $20 billion in IRS enforcement funds that are currently tied up. The IRS Commissioner emphasized the importance of the budget increase in enhancing taxpayer services and expressed the agency's commitment to utilizing the funds effectively.
In the event of budget cuts, the taxpayer advocate cautioned against reducing funding for taxpayer services and information technology, emphasizing the need to maintain progress in IRS operations.
