Battling the backlog

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Feb 07, 2022 View in browser   By Bernie Becker USE THE TECHNOLOGY: The IRS isn't exactly known for its cutting-edge technology. But tax professionals who have to interact with the agency keep hoping it will catch up a little bit — or at least get out of the dinosaur age. Take this as an example: The IRS is currently trying to work through a massive paper backlog that was magnified by the pandemic — including maybe nine million tax returns that need further processing, as well millions of other pieces sent from taxpayers. That backlog has led to all sorts of problems for taxpayers, including delayed refunds — and one relatively straightforward way that the IRS could avoid those issues in the future would be to make greater use of scanning, Pro Tax's Aaron Lorenzo noted. Only about one in 10 returns sent to the IRS comes on paper, with the rest filed electronically. But that still adds up pretty quick — it means that close to 17 million individual returns from the last tax filing season were filed on paper, out of some 169 million in all. This isn't just an issue of increased speed for the IRS, either. The national taxpayer advocate, an in-house watchdog, has found that about a quarter of the tax returns that have to be manually entered into the IRS systems have mistakes. Some of the ways the IRS could make more use of scanning would be pretty simple — think QR codes. And to be fair, some potential avenues for the IRS are already in use — taxpayers can upload scanned documents as part of the audit process, and the national taxpayer advocate, Erin Collins, has suggested the agency could allow that in other areas, too MORE ON THAT IN A BIT, but first welcome to the "rested and ready to begin" version of Weekly Tax. ( Happy February Seven, everyone.) Since we're rocking and rolling: Today marks 58 years since The Beatles very famously landed at JFK Airport in New York, a couple days before their first appearance on "The Ed Sullivan Show." We could use a little hand-holding. Send your best tips and feedback. Email: bbecker@politico.com, alorenzo@politico.com, bfaler@politico.com and teckert@politico.com. You can also reach us on Twitter at @berniebecker3, @aaronelorenzo, @tobyeckert, @Brian_Faler, @POLITICOPro and @Morning_Tax.   HAPPENING THURSDAY – A LONG GAME CONVERSATION ON THE CLIMATE CRISIS : Join POLITICO for back-to-back conversations on climate and sustainability action, starting with a panel led by Global Insider author Ryan Heath focused on insights gleaned from our POLITICO/Morning Consult Global Sustainability Poll of citizens from 13 countries on five continents about how their governments should respond to climate change. Following the panel, join a discussion with POLITICO White House Correspondent Laura Barrón-López and Gina McCarthy, White House national climate advisor, about the Biden administration's climate and sustainability agenda. REGISTER HERE.     Want to receive this newsletter every weekday? Subscribe to POLITICO Pro. You'll also receive daily policy news and other intelligence you need to act on the day's biggest stories. STAYING WITH THE IRS: Today marks two weeks since the current tax filing season opened — and lots of taxpayers can still expect to be in for a bumpy ride, according to experts (and the IRS itself). Nina Olson, who preceded Collins as national taxpayer advocate, took to The Washington Post to outline several steps that the IRS could take to offer a smoother process to millions of people who just want to file without a hitch — and potentially get a refund. Among those suggestions: The government should classify IRS workers working on tax returns as essential, which would require them to work in-person — hopefully with increased protections of some sort, wrote Olson, who now heads the Center for Taxpayer Rights. Olson also thinks that the IRS should be leaning more heavily on technology to streamline the process. But to really battle the backlog, the IRS also just needs more employees. That means diverting all available employees to handling paper returns, and maybe even trying to lure recent retirees back into the fold for at least the time being, Olson wrote. More of a long-term thought: The IRS already has shifted some 1,200 staffers to try and help control the backlog. But Olson noted that the agency had filled 179 customer service positions, at a time when IRS Commissioner Chuck Rettig had set a goal of 5,000 of those employees. It's not hard to see why the tax collector might run into trouble filling those positions — not only is the job rather high-stress, it also doesn't pay all that well, according to the National Treasury Employees Union, which represents thousands of IRS staffers. But that also raises questions about what it might take for the IRS to get enough customer service representatives on board. NTEU officials have suggested that better staffing would lead to improved morale and make the workload for staffers more manageable — but that would also require getting more people to sign up for the job in the first place. "While pay is certainly an issue for CSRs and many other positions in the federal government, we believe that recruitment and retention would also be improved by simply getting the numbers of CSRs up to the level necessary to answer the millions of calls taxpayers make to the IRS each year," Tony Reardon, the NTEU's national president, told Weekly Tax in a statement. WAITING FOR MANCHIN: Anyone looking for any momentum for the Democrats' climate and safety net package — well, they'll have to keep searching. Sen. Joe Manchin (D-W.Va.) suggested on CNN's "State of the Union" on Sunday that some parts of the House-passed Build Back Better legislation could become law this year. But Manchin also noted once more that talks with President Joe Biden over how to slim down the social spending package have been preliminary at best, and insisted that any measure should have to move through Senate committees. (Democrats have not wanted to do that, because committee rosters are evenly split in a 50-50 Senate.) And perhaps even more to the point: It does feel like something is always eclipsing the BBB talks these days. Manchin, for instance, insisted he was more focused right now on ensuring the government stays funded, ahead of a deadline less than two weeks away. Around the World BEFORE IT'S TOO LATE! Rich people in Spain are working double time to protect their money , after the government targeted the tax advantages of certain investment vehicles, Bloomberg reports. Last year, Spain's parliament sought to limit the tax benefits of an investment product known as sicavs, after a far-left member of the governing coalition argued that those vehicles were allowing the wealthy to dodge taxes. Sicavs typically have at least 100 investors, with most shares owned by a main investor and others holding as little as one share. Investors in sicavs also paid a 1 percent tax rate on profits, compared to the 25 percent corporate rate. To make that product less attractive, the Spanish parliament forced everyone involved in a sicav to have at least 2,500 euros invested. (If not, the tax rate on profits increased to 25 percent.) So far, the government appears to be getting what it wanted — Spain's market regulator says that more than a third of the almost 2,300 sicavs in the country have said that they plant to close down.   STEP INSIDE THE WEST WING: What's really happening in West Wing offices? Find out who's up, who's down, and who really has the president's ear in our West Wing Playbook newsletter, the insider's guide to the Biden White House and Cabinet. For buzzy nuggets and details that you won't find anywhere else, subscribe today.     Around the Nation LOOKING FOR A LITTLE EXTRA HELP: A group of suburbs outside Minnesota's Twin Cities want the state legislature to allow them to enact citywide sales taxes to help fund infrastructure projects, The Minneapolis Star-Tribune reports. Cities like Bloomington, Edina, Golden Valley, Roseville and Brooklyn Center argue that they have attractions that lure visitors from around the region, so it only makes sense for an increase in the sales tax to help pay for their upkeep. (For instance, Edina has an arena that attracts about a half million ice skaters and hockey players each year.) Minnesota has a 6.875 percent sales tax, and localities will usually tack up to a half-percentage point on top when given the opportunity. In all, some 40 cities around Minnesota have already won approval to enact local sales taxes, with both Minneapolis and St. Paul putting them into place back in the 1980s. Once a city gets approval from the legislature, its voters must then back a specific project to be financed by the extra revenues. Quick Links CNBC: " The 'Bitcoin Family' immigrates to Portugal for its 0% tax on cryptocurrencies." AP: "Idaho governor signs record $600M income tax cut." Quartz: "African governments now want to tax your Netflix and Chill." Did you know? The Southdale Center in Edina, Minn., known as the first modern shopping mall in the U.S., opened in 1956.   Follow us on Twitter Toby Eckert @tobyeckert Bernie Becker @berniebecker3 Brian Faler @brian_faler Aaron Lorenzo @aaronelorenzo   Follow us

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