IRS to study telework’s impact on workforce in omnibus spending bill

Congress is giving the IRS new priorities to staff up and deal with a pandemic-era backlog of tax returns — but a slightly smaller annual budget to meet those...

Congress is giving the IRS new priorities to staff up and deal with a pandemic-era backlog of tax returns — but a slightly smaller annual budget to meet those goals.

The fiscal 2023 omnibus spending bill lawmakers unveiled this week cuts $275 million from the IRS budget, for a total budget of $12.3 billion for the rest of the fiscal year.

The IRS, however, still keeps $80 billion in multi-year spending as part the Inflation Reduction Act. Those funds will allow the agency to rebuild its workforce and modernize its legacy IT after more than a decade of budget cuts.

The Senate Appropriations Committee, in a summary of the FY 2023 omnibus, said the IRS budget has decreased by about 15% in real terms since fiscal 2010, and that staffing levels have dropped to 1974 levels.

The committee said the $80 billion in IRA spending will help the IRS improve its level of taxpayer service and beef up enforcement over the next decade, but warned against continued cuts to the IRS annual budget.

“This multi-year funding is meant to supplement, not supplant, annual discretionary funding,” lawmakers wrote.

The omnibus spending bill for FY 2023 renews direct hiring authority for the IRS to fill positions needed to reduce a pandemic-era backlog of unprocessed tax returns. Congress also authorized this direct hiring authority in the fiscal 2022 spending bill.

Former IRS Commissioner Chuck Rettig told Congress the agency would reach a “healthy” state with its tax return backlog by the end of this calendar year.

The IRS has deployed “surge teams” and implemented mandatory overtime to address the backlog. Rettig in October authorized a onetime $1,000 bonus to IRS employees working on surge teams.

While the omnibus looks at ways to grow the IRS workforce, the spending bill prohibits the agency from giving bonuses to employees or rehiring former IRS employees “without considering conduct and compliance with federal tax law.”

IRS to study telework impact on workforce

The spending bill gives the IRS and Treasury Department 180 days to report to Congress how increased telework for employees has impacted recruitment, retention and organizational performance.

The IRS report will provide some answers to lawmakers who have scrutinized the agency’s office reentry plans. Some members of Congress have called for the IRS to bring all its employees back to the office full-time. The IRS started bringing employees back into the office in the summer of 2020, earlier than most federal agencies.

While the spending bill looks at telework as a potential recruiting tool for the IRS, lawmakers are also asking Treasury’s Bureau of the Fiscal Service to ensure consistent in-person staffing at its facilities.

The spending bill directs Fiscal Service to consult with state and local leaders and its workforce on a long-term plan for operating and maintaining their current facilities.

“Federal agencies, including the Bureau of the Fiscal Service, face challenges in returning to pre-pandemic levels of operations at federal facilities as a result of the coronavirus,” lawmakers wrote. “At the same time, the bureau has a responsibility to maintain continuity of operations and minimize uncertainty among its employees and the communities in which it operates, including the bureau’s facilities in Parkersburg, West Virginia.”

Better taxpayer services for next filing season

The omnibus supports ongoing, IRA-funded plans for the IRS to improve its level of taxpayer service ahead of next year’s filing season.

The spending bill directs the IRS to improve its level of service to taxpayers calling its toll-free hotlines, and directs the agency to make “improving phone service a priority and to enhance response times.”

The fiscal 2023 spending bill also directs the IRS to “do more to address the needs of rural taxpayers” by ensuring access to local Taxpayer Assistance Centers.

Treasury Secretary Janet Yellen announced in September that the IRS is planning to fully staff up all Taxpayer Assistance Centers ahead of next year’s filing season.

Update on federal contractor tax compliance

The spending bill also requires the IRS and Treasury to give Congress a status update on the implementation of a system to certify that federal contractors are up to date with their tax obligations.

Congress provided $30 million for the IRS to develop a Federal Contractor Tax Check System, but funds appropriated for this system have not been fully obligated, and development of the system has been delayed.

Once implemented, the IRS would issue tax certificates to federal contractors indicating that they are not delinquent on their federal taxes.

The spending bill gives the IRS and Treasury 60 days to brief lawmakers on the status of the system, “including the causes of any delays that prevent the IRS from providing these certificates to vendors in fiscal year 2023.”

Putting unspent COVID-19 funds into IT modernization

The spending bill directs the IRS to put unspent COVID-19 spending into its IT modernization initiative.

The IRS received more than $1.4 billion in the American Rescue Plan Act, which Congress issued to ensure “integrated, modernized and secure IRS systems.”

The spending bill directs the IRS use unobligated funds from the American Rescue Plan to modernize its Customer Account Data Engine 2 and Enterprise Case Management System, as well as update web applications, taxpayer assistance systems, cybersecurity and data protection.

The spending bill also directs the department to conduct a semi-annual review of the IRS’ major IT investments. The omnibus directs the Government Accountability Office to review and provide an annual report to the Committees evaluating the cost, functionality and schedule of major IRS IT investments.

The IRS already received $4.75 billion for its IT modernization initiative in the Inflation Reduction Act.

IG funding to prioritize cybersecurity

The bill gives the Treasury Inspector General $49 million and directs the watchdog office to prioritize oversight work on cyber-based threats and the “potential vulnerability of Treasury’s networks.”

“Treasury’s information systems are critical to the core functions of government and the nation’s financial infrastructure,” lawmakers wrote.

The spending bill also directs another watchdog office, the Treasury Inspector General for Tax Administration, to prioritize its work combating fraudsters that impersonate IRS employees.

“The agreement commends the work that TIGTA has done thus far to combat IRS impersonation scams, encourages TIGTA to continue to prioritize working with the IRS to increase awareness of this scam, and urges TIGTA to pursue the criminals perpetrating this fraud,” lawmakers wrote.

The spending bill gives the IRS 120 days to update Congress on outstanding GAO and TIGTA recommendations regarding security flaws, steps taken to comply with the Federal Information Security Management Act and other security requirements.

 

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