IRS Modernization and Capacity Building: Seeking Sustainable Funding
In order to continue meeting Congressionally mandated missions, the Professional Managers Association (PMA) advocates for robust and consistent funding to modernize the capabilities of the Internal Revenue Service's (IRS/Service).
Unfortunately, the IRS capabilities have struggled to keep up with the global pandemic. Throughout COVID-19, the IRS has provided considerable relief to the American people while still administering the traditional filing season. While IRS employees have worked diligently to deliver this relief as expeditiously as possible, the Service is slowed by resource and technology challenges.
Nearly a decade of consistent budget cuts has severely limited the ability of the IRS to perform critical functions such as collecting $3.5 trillion in revenue, processing 253 million tax returns, and issuing $452 billion in tax refunds. The IRS is our nation’s single largest revenue source and must operate efficiently to allow our federal government, across all federal agencies, to continue supporting the American people.
The Congressional Budget Office (CBO) estimates increasing the IRS’s funding for examinations and collections by $20 billion over 10 years would increase revenues by $61 billion. No other agency can boast such a return on investment. The research is clear – consistent funding saves taxpayer funds.
Additionally, a lack of consistent funding has preventing the IRS from undergoing the necessary long term planning to modernize its legacy IT systems.
The IRS must upgrade and integrate its 60+ overlapping taxpayer databases, used by more than five generations of IRS employees. The Individual and Business Master Files (IMF/BMF) are the oldest computing systems still in use within the Federal government, developed with appropriations under President Eisenhower and implemented in the Kennedy administration.
The IRS is facing significant risks due to its reliance on legacy programming languages, outdated hardware, and a shortage of staff with critical skills needed to maintain these systems.
The Department of Treasury Inspector General recently found that in FY 2019, the IRS spent over $2.86 billion to operate its current information technology infrastructure, nearly $2.04 billion (71 percent) of which was on operations and maintenance. In other words, the IRS spends nearly 20% of its annual budget merely trying to stabilize its outdated systems, and this does not include the additional costs incurred due to losses in productivity as employees experience IT-related work stoppages. Until the IRS is able to dedicate consistent time and funding to update its technology, the IRS will continue spending more to maintain legacy systems than to modernize them.
The lack of long term investment in the IRS also stifles the Service’s ability to execute congressional mandates which increasingly fall well outside of our agency’s mission.
Since 1993, the Congress has called on the IRS to provide significant, direct economic support and benefits to Americans, well outside of our agency’s mission. Through new and expanded refundable tax credits, several rounds of economic stimulus payments, support for alternative energy, healthcare expansion, and much more, the Service has morphed from the world’s largest, most complex tax collection mechanism to an agency increasingly responsible for providing benefits to those taxpayers in the most economically precarious situations. The IRS is neither funded nor staffed as a benefits agency and the National Taxpayer Advocate has called on the Congress repeatedly to take a look at our dual mission, as recently as 2019.
This failure to acknowledge formally how the IRS’s role has evolved over the last 30 years means our agency lacks the tools it needs to effectively and competently administer the tax code. For example, the Congress has not provided an objective source of information regarding custodial parents for child-based tax credits. In other words, the IRS does not know who a child’s legal parent is, which leaves the IRS with few alternatives to seeking intrusive and onerous documentation when custody is questioned. IRS employees are not family court lawyers.
During the 2008 economic crisis, the Congress called on the IRS to stabilize the housing market but did not provide tools for the IRS to independently research land deeds and titles resulting in widespread burden on taxpayers to provide documentation. IRS employees are not experts in local deed recording practices.
In order to administer the Individual Taxpayer Identification Number program, which provides SSN-type numbers to non-citizen taxpayers, the IRS needed to learn how to examine foreign passports, foreign medical records, and foreign birth certificates, among others. IRS employees are not forensic examiners for foreign documents.
In 2020, the Congress made the Social Security Administration’s Death Master File (DMF) fully available to the IRS in real time - 40 years after it first became available.
In a January 2021 report to Congress on implementation of the Taxpayer First Act, the IRS outlined the need for $4.1 billion in funding over a five-year period to allow full implementation of the Act. Without this sustained funding, the IRS continues to struggle with improving taxpayer experience, coordinating Service-wide initiatives, and reaching traditionally underserved communities.
For these reasons, PMA supports not only robust funding immediately, but also multi-year funding to provide necessary consistency.
This is a sentiment shared across the IRS. Recently, while testifying before the House Committee on Appropriations, IRS Commissioner Charles Rettig told lawmakers, “For any new endeavor provided to the Internal Revenue Service, funding, staffing, training, are critical. Multi-year, consistent, adequate funding is critical. One-year funding not followed up the next year does put a stress on our resources as we end up having to borrow from one -- to the extent we can, borrow from one side to help fund another portion of the Agency… [W]e are an Administrative Agency. We don't choose our challenges but I'm confident in our people but… we need to support both financial and staff and training and we need to have it in an ongoing manner as long as we are called upon to do any of these challenges.”
The IRS is in dire need of robust, long-term funding. Only by adequately investing in its workforce and technology can the IRS provide the returns necessary for ensuring our government operates efficiently for the American people. PMA continues to advocate for the funding amount and structure that best allows the IRS to modernize the taxpayer experience.
The column part of the FEDforum, an initiative to unite voices across the federal community. The FEDforum is a space for federal employee groups to share their organizations’ initiatives and activities with the FEDmanager audience.
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