How well did the IRS handle pandemic?

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The IRS this year has been blessed – or maybe it’s cursed – to live in interesting times. Delayed filings, getting millions of checks out under the pandemic stimulus CARES Act, having nearly all of its employees telework. So how did it do? For one look at IRS challenges, Federal Drive with Tom Temin turned to the Associate Treasury Inspector General for Tax Administration Russ Martin.

Interview transcript:

Tom Temin: Russ, good to have you back.

Russ Martin: Thank you, good to be here.

Tom Temin: I guess this has been an interesting year for you and for the IRS that you take a look at. And let’s talk about the filing season, which got extended six months. I think that’s unprecedented in my memory. What’s your assessment of how they handled all of that?

Russ Martin: As you mentioned, they did extend the filing season to July 15. And then folks that apply for extensions, their returns are due Oct. 15. So they’re still dealing with some significant challenges in terms of backlogs of unopened mail, unprocessed returns, but they are trying to use some different approaches to deal with that. So for example, because of the social distancing, they’re only bringing back 50% of their folks to the tax processing centers. So what they did to mitigate that is increased to another shift to continue to work this inventory that they have that’s backlogged. And they’re also looking at ways to transcript work to other centers. Challenges exist for that, because some centers can only process certain types of work. But overall, I think they’re working through what has been a significant challenge.

Tom Temin: The other thing we haven’t stated explicitly is that even though millions and millions of entities do file online, they still get lots of paper filings, even in this day and age, don’t they?

Russ Martin: They do, both individual and business. In fact, that’s an area that we in TIGTA are looking at, on what’s their efforts to move forward with modernizing paper return processing, and to continue to increase e-file which, they’ve done a really good job in terms of where they started with e-file to where they are now. But there’s definitely some room to increase the e-file and decrease the paper returns that are being filed.

Tom Temin: And on the e-filing front, which was equally delayed, I mean people could have filed electronically up until Oct. 15. Is it your sense that the processing that happens online, their computer systems, can keep up with that also?

Russ Martin: Yes, the nice part about e-filing, if you had during the time that the processing centers were closed down, if you had no identified – so when an e-file return comes in to IRS, it goes through various computational checks and verifications, and other types of filters. If an e-file return passes all those validations and verifications, then it continues on through processing and any associated refund check will be issued. So e-filing definitely allowed the IRS to continue processing tax returns when their operations were closed. The issue is if there’s an error identified on an e-file return, it then drops out to frequently require someone to manually review that and that’s where backlogs existed with both paper and e-file returns that are still being worked through.

Tom Temin: And that’s because people can’t get into the office. They can’t telework in terms of being able to look at e-filing systems and information?

Russ Martin: I have to give IRS a compliment that they have aggressively moved work to the telework environment. And they continue to do that. But when the whole pandemic hit, they were – I won’t say in their early stages, but they did not have as many folks that were telework ready. So that requires equipment to be provided. It requires specific training, etc. But as they move forward, they’re increasing the amount of folks that are teleworking and what we anticipate seeing in a customer service strategy that they’re developing is that that will be basically the way of the future in terms of continuing to do work remotely.

Tom Temin: So once people are equipped to work remotely or telework, then they can access the systems they would normally see in the IRS offices?

Russ Martin: I believe that’s the case, yes. I mean, that they can get their inventory of work that they need to resolve and work through it, yes.

Tom Temin: We’re speaking with Russ Martin. He’s Treasury associate inspector general for Tax Administration, in TIGTA. And so you looked at a long list of challenges as you do every year. And what about the CARES Act, which required the IRS to get all of these checks out? And of course, you always hear the horror stories, there were dead people and so forth. But my sense is that on the whole, they did it remarkably well. What’s your assessment?

Russ Martin: Yeah, and I would agree with that. As we reported back in June, we issued an interim report showing results to date. As of Oct. 15, they’ve issued over 166 million payments totaling over $277 billion and I would definitely agree they did a remarkable job. The amount of time that it took them to do the program and get up and running and get the first checks issued, it was remarkable. I mean, it took a significant amount of effort on the part of many folks in the IRS. So we are seeing where there’s programming glitches at times, etc. And what we do is when we identify those we bring those to the IRS’ attention, and they take action on those. And then we’re also monitoring the issuance of recovery payments, meaning, if something occurred where an individual didn’t get the amount that they were entitled to, we basically bring those cases to IRS’ attention. They look at them. If they agree with them, then we create a tickler file to then monitor IRS’ efforts to reissue the new checks or the amount that was missing. But I think overall, they’ve done a really remarkable job. And just in general, as the CARES Act goes, there was a number of provisions that affect both individuals and businesses, the issuance of the payments is the most frequently identified one, but there is a number of credits that were provided to businesses that they had to immediately set up processes where most of the time or frequently, something would be sent to a processing center to then be processed. Well, they had to develop new effects processes, etc., to enable them to get the information in an electronic format to be able to work through those. So that’s another avenue that I think they’ve done a really good job on.

Tom Temin: And of course, they had stimulus payments as early as the Ford administration back in the 1970s. And the IRS has not fully modernized, but it has been on a continuous process of modernizing this system and that system over all these years. Would the work they’ve done, in your estimation, have paid off in their ability to respond to the latest pandemic, and the latest stimulus programs from Congress?

Russ Martin: I would tend to agree with that. I mean, it took a significant amount of programming. I mean, this is not new to them, they’ve issued stimulus payments previously. So what changes is the specific criteria that is used to determine who’s entitled to it, etc., and the parameters of income and all that. But I would tend to agree that they have a long term strategy to continue to improve on their systems. And as you can see, in a recently issued management challenges letter that we publish, that continues to be one of the challenges that we see. And we have a body of work around that, assessing IRS’ efforts to address that challenge.

Tom Temin: Sure, and getting back to the COVID response, we talked about teleworking, we’ve talked about the CARES Act stimulus and other benefits they had to process, and the delayed season. Anything else that affected them with respect to COVID?

Russ Martin: Well, I would say that one of the other areas that we’re looking at is at the time that the pandemic hit, and they closed all their offices well they shut down a number of their customer service operations. So that’s a big part of the work that we’re doing in terms of identifying, okay, when you restart those, which they have, do they have all the same number of offices open, number of opportunities for individuals to get assistance, etc. So we’re really working through that. And then more importantly, or equally as important, under the Taxpayer First Act, they’re required to develop a comprehensive customer service strategy. So we’re taking a hard look at, okay, are there lessons learned here that you’re building into your customer service strategy? And we are seeing that they are, in fact, building their lessons learned, telework, trying to get stuff in more of an electronic option rather than paper, moving payments to maybe different maybe to a lockbox rather than a processing center. So that’s the kind of stuff that we’re looking at in terms of, the hit they took on the customer service side of the house as well.

Tom Temin: Interesting, I think that’s coming across a lot of agencies that because of adaptations they had to make to the pandemic, turned out to be pretty good changes to have generally, and in normal times, and sounds like that’s true of the IRS?

Russ Martin: Yes, I would tend to agree with that. I mean, we’re seeing a renewed emphasis on digitalising paper, getting forms submitted by efax rather than sent in by paper, etc. So we’re seeing a lot of positives here and giving credit to the IRS, they’re also understanding that, hey, this provides a unique opportunity for us to maybe update or modernize our processes overall. And it’s pretty impressive, I think.

Tom Temin: And in doing the work for this latest report, do you have any sense of the morale or esprit de corps that might be in the employee workforce that is scattered, and nevertheless has these huge numbers of jobs kind of falling down on their heads?

Russ Martin: Yeah, I think in general, my other teams do walkthroughs at the processing centers to talk to folks that are working there and I think they’re pretty dedicated group of individuals that work extremely hard, that realize the importance of the work they’re doing and there is quite a bit of work to do. So I’m sure there’s unique challenges for them as well and the IRS wants to ensure the safety of those individuals that are at the processing centers. So trying to balance all that is a continued challenge.

Tom Temin: And I’m seeing talk about turkeys and I’ve seen a few Christmas trees, which means the 2021 filing season is not far off. Has all this created a crunch for them for the next six months?

Russ Martin: Well, you know, IRS does remarkably well dealing with stressful situations. But there’s no doubt that, the current backlog that they’re trying to aggressively work through, as well as planning for, for example, the economic impact payment requires them to change their tax forms. So an individual can report that on it. It also requires them to change programmings to basically do a reconciliation. So for example, when someone files their tax year 2020 return, if they are entitled to more of the economic impact payments. That’s where that reconciliation will take place. So there’s a great deal of work that they do normally. And then there’s additional work that needs to be done for the uniqueness of this upcoming filing season.

Tom Temin: Russ Martin is Treasury associate inspector general for Tax Administration. Thanks so much for joining me.

Russ Martin: You’re very welcome.

Tom Temin: We’ll post this interview along with his report at Hear the Federal Drive on your schedule. Subscribe at Apple Podcasts or Podcastone.

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