Lawmakers concerned about IRS heading into tax day

Rep. Jason Smith, R-Mo. AP Photo/Andrew Harnik

Tax day is around the corner, but lawmakers are raising the alarm that the IRS may not be ready to process the litany of new rules and regulations implemented by the Biden administration.

House Ways and Means Committee Chairman Jason Smith, R-Mo., and Oversight Subcommittee Chairman David Schweikert, R-Ariz., sent a letter to the Comptroller General of the U.S. Government Accountability Office raising concerns about the extra burdens recent legislation pushed by the Biden administration could put on the struggling agency.

“In Fiscal Year 2021, the Internal Revenue Service (IRS) received over 4.7 billion information returns – reports provided to the IRS to track business or trade payments and transactions – filed by third parties, most of which were filed electronically,” the letter said.

The Biden administration successfully pushed for $80 billion for the IRS to beef up auditing but has also put more expectations, such as auditing and tracking more transactions.

“In addition, recent legislation drastically lowered the threshold to $600 for reporting certain types of payments, such as those made using a third-party platform like PayPal or Venmo,” the letter said. “New regulations related to information reporting for transactions occurring across these digital assets could lead to the filing of billions more information returns.”

The IRS previously delayed the implementation of the PayPal and Venmo-related rule. The lawmakers called the IRS’ decision a “tacit admission” that it is not ready for the new administrative burden.

“While information reporting can help the IRS ensure accurate tax reporting and incentivize voluntary compliance with tax laws, those goals must be balanced against the burden that this reporting places on taxpayers, third-party providers, and the IRS,” the letter said. “Many Americans who will likely be subject to these new requirements – particularly given the low reporting threshold of $600 – are also likely to struggle to afford the level of accounting and tax preparation services that might be needed.”

The agency is still recovering from the burden of administering the COVID-era stimulus checks, which helped cause a tax filing backlog that the agency is still handling. The IRS has also taken fire after reports emerged that a Treasury Inspector General for Tax Administration report from 2021 showed the agency destroyed about 30 million taxpayer documents, files that Americans could need in the future if they are audited.

In February, lawmakers raised many of these kinds of concerns at the confirmation hearings for Daniel Werfel, Biden’s nominee to lead the IRS, who was eventually confirmed.

“Massive backlogs have left desperate families and small businesses waiting on much-needed returns as they fight skyrocketing inflation,” U.S. Sen. John Barrasso, R-Wyo., said during the hearing. “Restoring the credibility of the agency is going to be a steep mountain to climb. When we visited I said this would be critical as part of your job. The policies enacted by President Joe Biden’s reckless tax and spending bill are really not going to be helpful in trying to regain the credibility of the American people for the agency.” 

Tax day this year is April 18. 

Republished with the permission of The Center Square.