Recently I had the unique opportunity and privilege to have a far-reaching and frank one-on-one conversation with IRS Commissioner Charles Rettig. During our 90-minute discussion, which was both insightful and inspirational, he expressed heartfelt thanks to the tax professional community and all Internal Revenue Service employees for their extraordinary efforts during the last two tax seasons, as we all dealt with the closures and other challenges caused by the pandemic.
In addition to addressing the key issues the IRS has faced during this unique period in our history, he shared personal anecdotes, many of which have had a decided impact on how he has approached his leadership role and priorities at the IRS. Commissioner Rettig spoke passionately and with great pride about his family, his admiration for hard-working IRS employees, his love of country, and his commitment to service as he approaches the last few months of his statutory term as IRS commissioner.
Prior to the pandemic, the IRS already faced continually decreasing budgets, staff shortages and technology challenges as it interacts with most individuals and businesses in our country. The IRS's scope of responsibilities expanded during the pandemic to deliver multiple rounds of Economic Impact Payments and Advance Child Tax Credit payments. These increased demands placed further strain on the agency’s resources at a time when their offices were forced to close, employees were working from home — most for the first time — and staffing was at levels not seen since the 1970s.
"Congress rescued the Internal Revenue Service on March 15 when they approved our fiscal year '22 budget and… gave us direct hiring authority," the commissioner told me. "We immediately started holding job fairs in Kansas City, Ogden and Austin, three processing centers, and made on the spot job tentative offers to over 2,500 people.” He also reiterated the agency’s commitment to meeting the goal of onboarding 10,000 additional staff over the next year.
While encouraged by the increased funding and direct hiring authority, the commissioner also made it clear the IRS needs significantly more funding to do what it needs to get fully staffed and upgrade its technology systems. He stated that President Biden’s 2023 budget proposal for the IRS of $14.1 billion in funding — far above what Congress allotted in March of this year — is vital to get the IRS fully up to speed.
“Funding is critical for us to maintain, onboard and train the staffing we need and upgrade our technology infrastructure to provide the levels of service we all expect and deserve,” said Rettig. “It is inexcusable that the greatest country on the planet has an underfunded agency that interacts with more Americans than anyone else.”
Top challenges facing the IRS
Rettig acknowledged significant challenges that the agency has faced during the pandemic with respect to providing “meaningful service” to taxpayers, tax professionals and other stakeholders. He and the entire agency have committed to being “healthy” by the end of 2022, which he defines as “ready to provide pre-pandemic level service levels.” He called out specific short- and long-term challenges that the agency needs to overcome to meet this commitment.
1. Processing prior-and-current-year tax returns. The first — and most critical — short-term challenge for the IRS is to get through the existing inventories of unprocessed 2019 and 2020 tax returns and other correspondence, as well as processing 2021 returns by the end of this calendar year to provide the world-class level of service "that people in the country deserve."
Approximately 8.7 million individual returns from current and prior years remain unprocessed as of mid-April. Of these, 2.9 million returns require error correction or other special handling, and 5.8 million are paper returns waiting to be reviewed and processed. Meanwhile, 2.2 million Form 1040-X remain unprocessed. The current timeframe for processing these amended returns is up to 20 weeks; in prior years, that time frame was up to 16.
Over 20 million returns were placed into error resolution services (ERS) to be handled manually for review and processing during calendar year 2021. Year over year, that number is down by 90%, a significant achievement.
The agency has created "surge teams" to eliminate existing and prospective inventories of unprocessed returns as quickly as possible. These surge teams are made up of both newly hired staff and experienced employees who have been reassigned from other functions to support this initiative.
2. Answering phone calls on the Practitioner Priority Service and general taxpayer phone lines. Another short-term challenge the IRS faces is to meet the mandate handed down by Congress with the fiscal 2022 budget — answering 85% of all calls on a timely basis. Peak periods see 1,500 calls per second, with about 15,000 customer service representatives to answer the calls.
The IRS has undertaken several initiatives to meet this goal in addition to new hiring:
- Staffing changes: Both seasonal and part-time workers have been made permanent to assist with calls and improve wait times.
- Leveraging new technologies: The IRS has instituted never-before-used call-back options, including chatbots, voice bots and live “assistors.”
- Alternatives to calling in: The IRS website expansion and other user-friendly taxpayer tools provide tax professionals and taxpayers a viable alternative to calling in.
While the IRS has made enormous progress in reducing its inventory backlog and answering calls, there is much to be done and the commissioner still strongly encourages tax professionals and taxpayers to file electronically whenever possible and use irs.gov and the IRS' various online tools. Earlier this year, I covered many of these alternatives in
3. Hiring. The staffing issues plaguing the IRS are both short-term and long-term challenges. For decades, the IRS has been severely understaffed, a compounding effect of experienced workers retiring, hiring freezes and budget cuts. In March, Congress provided an additional $675 million in funding for the IRS in the fiscal year 2022 omnibus bill. The IRS also received “direct hiring authority,” allowing the IRS to remove much of the red tape around government hiring, including holding in-person and virtual job fairs and making on-the-spot job offers.
The IRS has been holding job fairs in several cities around the country, with the goal of hiring 5,000 people immediately and another 5,000 next year. Innovative new hiring approaches have been implemented, such as extensive hiring in underserved areas like Puerto Rico and the Mississippi Delta. And for the first time in the agency’s history, the IRS has partnered with the
"As a spouse of a military person, knowing that the military person will be there for maybe three years, sometimes it's difficult for the spouse to get employment,” Rettig told me. “We can hire all of those spouses; we have the positions. When we hire people, we hire all types, from people who open and sort envelopes through to the most sophisticated cyber folks on the planet."
Despite these actions, challenges persist. “Many of those we are looking to hire are in the range of $15 to $17 an hour, which puts us right up against Amazon, Walmart and Target, all of whom have announced aggressive hiring initiatives,” said Rettig.
4. Significant funding increase needed. The IRS resources are vastly overextended and correcting this won’t be a quick fix.
The agency’s staffing is down to 1970s levels. The IT infrastructure needs to be modernized. Training needs to be increased to equip agents better to perform high-quality and more complex audits. The president’s fiscal year 2023 budget, which proposes $14.1 billion for the IRS, would allow the agency to take important steps forward in improving taxpayer service, modernizing systems, and ensuring fairness in the tax system. The commissioner told me that “for the IRS to truly be able to deliver for the American people with long-term improvements, stable, multiyear funding needs to be in place to allow the agency to rebuild.”
Improving service to diverse communities
Amid the challenges posed to the agency by the pandemic and the multitude of new tax law changes, the IRS has continued to focus on improving service to diverse communities, including communicating with taxpayers in their most comfortable language. This is done by going directly into communities to vet the language used with residents.
Taxpayers have responded to the agency's efforts; there were nearly 90 million visits to non-English pages on IRS.gov last year (out of 2 billion visits total). Through mid-February of 2022, there have been about 7.1 million visits to non-English pages. The top 20 pages visited on IRS.gov are in more than 20 different languages.
Commissioner Rettig shared a story that clearly indicates how this hits home for him. “My wife is from Vietnam, and her parents live in Little Saigon in LA,” he said. “I took our Vietnamese language documents to my wife, a frontline tax professional. She reviewed the documents with her parents and other residents in the community. They said this language doesn’t reflect the way we speak. We took their suggestions and retranslated the documents to reflect the language they could relate to. And with the help of tax professionals throughout the country, we did this over and over again in diverse communities for over 30 languages.
Since 2021, the IRS has taken important steps to further improve services offered in multiple languages:
- Provided Form 1040 in Spanish during the 2021 filing season for the first time.
- Gave taxpayers the opportunity to indicate on a new Schedule LEP (Limited English Proficiency) whether they want to be contacted by us in a language other than English. This schedule, filed with the 1040, allows taxpayers to select one of 20 languages to receive communications from the IRS. During calendar year (CY) 2021, the IRS received approximately 326,000 Schedule LEPs.
- Made Publication 1, Your Rights as a Taxpayer, available in 20 languages.
- Issued a new, streamlined version of Publication 17, Your Federal Income Tax, available in seven languages.
These efforts continue this year. The agency has completed converting 34 Spanish notice inserts to Braille, text, audio and large print (as of January 2022). They’re also working on converting Form 1040, main schedules and six publications into Spanish Braille and large print. And they continue working to increase our communications and outreach materials, including information shared on social media channels, into additional languages.
This is an area in which the commissioner is particularly passionate. “The IRS will continue to do more to enhance the taxpayer experience for those who are more comfortable using a language other than English, including evaluating automated translation tools,” he said. This effort is anticipated to be ongoing for several years.
I asked Commissioner Rettig how he came to be nominated and how he and his family approached deciding whether to accept.
“You know, I didn’t reach out for the position of commissioner,” he shared. “I got a cold call, essentially saying, ‘Would you have an interest in being the next commissioner of the IRS?’ I hadn’t thought about it and told the gentleman on the other end of the phone that if he wanted to know more about my background, he could go to my company website and learn more. He replied, ‘I have a five-inch, three-ring binder of your background in front of me.’ Of course, he could use that."
“Everything went fast, and when it became apparent that I would receive the nomination, I came home to my wife and asked her opinion,” he added. “I told her that it was up to her whether I accepted the nomination and we moved to Washington, D.C., or if we went on as we were. And not only did I want her buy-in, but I also wanted her parents on board."
“My mother and father-in-law live in Little Saigon,” he continued. “They do not speak English. They’re well into their 80s. Her mother is dealing with Alzheimer’s. Her father is disabled and spent nine months imprisoned in a reeducation camp after the U.S. departure from Vietnam. If we went to D.C, it would mean we wouldn’t be there to help take care of them; there’d only be one of my wife’s six siblings in the Greater Los Angeles area to help. So it wasn’t, ‘Tam, pack your bags.’ It was, ‘Tam, it’s up to you.’"
“Fast-forward to my swearing-in,” Rettig continued. “My mother and father-in-law were there. It was my father-in-law’s fourth flight in his entire life. Treasury Secretary [Steven] Mnuchin swore me in and first introduced my wife, my father-in-law and my son, who came in from deployment in the Sinai Peninsula with the U.S. Army."
“While introducing my father-in-law, the secretary gave his background and asked him to stand up,” Rettig recalled. “And I watched my father-in-law receive appreciation from probably 500 or so people as the secretary is saying, ‘This gentleman served alongside U.S. soldiers in Vietnam and was imprisoned for three years, nine months for the privilege of doing so when Vietnam fell. The fact that this country, in the form of Secretary Mnuchin, gave that to my father-in-law, I can’t give back enough.”
Final words
When it comes to the future of the IRS, Commissioner Rettig said it best: “It’s critical for us to get every issue right for taxpayers and tax professionals. We need to prepare this agency for the next crisis, whether that’s pandemic-driven or otherwise."
“It is inexcusable that the greatest country on the planet has an underfunded agency that interacts with more Americans than anyone else,” he added, noting that “96% of the gross revenue of the United States of America flows through the IRS; in fiscal 2021, that number was $4.1 trillion. Making the IRS successful in significant part helps this country be successful. And those aren’t talking points; that’s from the heart. And I believed that coming in, and I know that today.”
Commissioner Rettig is the first IRS commissioner with a tax background since 1997. As to future leadership at the IRS, he said he feels strongly that those who follow him as commissioner should be tax professionals who understand the day-to-day problems faced by the industry and the taxpayers they serve.
