From the U.S. Government Accountability Office, www.gao.gov

Transcript for: The Challenges Facing IRS Before and During COVID-19,
And What It Means for Taxes in 2021

Description: The IRS processes more than 150 million individual and
business tax returns each year. While the IRS has modernized its process
to allow for electronic filings, several key functions remain
paper-based, including about 40 percent of business-related tax forms.
In addition, during the 2020 filing season, the IRS faced a number of
challenges providing help to taxpayers, and processing tax returns
because of COVID-19. We talk with GAO's Jessica Lucas-Judy to find out
more.

Related GAO Work: GAO-21-251, Tax Filing: Actions Needed to Address
Processing Delays and Risks to the 2021 Filing Season

Released: March 2021 

[Intro music:]

[Jessica Lucas-Judy:] Addressing the recommendations in our report will
help IRS provide better customer service and be able to process tax
returns in a timely way.

[Holly Hobbs:] Hi and welcome to GAO's Watchdog Report, your source for
news and information from the U.S. Government Accountability Office--
celebrating 100 years of fact-based, non-partisan government oversight.
I'm Holly Hobbs. The IRS processes more than 150 million individual and
business tax returns each year. While the IRS has modernized its process
to allow for electronic filings, several key functions remain
paper-based, including about 40 percent of business-related tax forms.
In addition, during the 2020 filing season, the IRS faced a number of
challenges providing help to taxpayers, and processing tax returns
because of COVID-19.
Today we talk with Jessica Lucas-Judy--an expert on Tax Policy and a
director in our Strategic Issues Team--about a new report that looks at
some of these challenges facing the IRS. Thank you for joining me,
Jessica! 

[Jessica Lucas-Judy:] Thanks for having me, Holly.

[Holly Hobbs:] So Jessica, can you give us some examples of challenges
the IRS faced this year because of COVID? 

[Jessica Lucas-Judy:] The filing season typically opens late-January.
And January 2020 and early-February 2020, things were going along pretty
well. And then, of course, the pandemic hits and everything started
shutting down. But even before then, IRS was dealing with some of the
long-standing challenges that we've reported on in the past. And this
included things like difficulty hiring enough seasonal workers to be
able to handle the influx of mail and tax returns and refunds and phone
calls. Legacy information technology systems--for example, their core
tax filing system is about 60 years old. They have a lot of paper forms,
a lot of paper and in-person processes. The same staff have to handle
the mail and handle the phones. There are last minute changes to the law
that IRS then has to incorporate into forms and instructions. So all of
those things were already there. And then when the pandemic hit, that
just exacerbated the problem.

[Holly Hobbs:] And so the IRS also, typically, provides in-person
assistance to folks who need help with their tax returns. How were those
services impacted?

[Jessica Lucas-Judy:] For the safety of employees and taxpayers, IRS
closed all of its in-person operations. They shut down everything in
late-March. They began reopening in June and by early-December they had
about three-fourths of their centers that were open. Those were fully
operational, but with fewer staff and limited hours. So that did have an
effect on the ability to get services in-person from the IRS. 

[Holly Hobbs:] Beyond extending the tax filing season to July in 2020,
what other changes did the IRS make in response to COVID-19? 

[Jessica Lucas-Judy:] So as I mentioned, they closed their processing
centers, their assistance centers. They directed employees who were able
to telework to telework.  They also paused enforcement and collection.
Again that was both for their own staff as well as to provide some
relief to taxpayers. They closed their live telephone lines for a while.
They were able to get most of those fully operational by the end of the
filing season in July, but still with longer wait times than usual. And
because they had fewer people answering phones and the in-person
services weren't available, IRS put more information on its website. 

[Holly Hobbs:] So, while this was happening, IRS was also responsible
for distributing economic relief checks to individuals as part of the
pandemic response. How did that extra workload impact the IRS, and were
there any issues in distributing those payments? 

[Jessica Lucas-Judy:] It didn't have too much of an effect on IRS's
filing season operations because those were primarily different staff.
One thing that was related to the filing season is if there were any
delays in processing 2019 tax returns because those were the things that
the economic impact payments were based on. And so, if someone filed on
paper and their paper return was caught up in IRS's backlog, or if there
was an indicator of potential fraud or identify theft or missing
information, and that return couldn't get processed, this person may not
have gotten their payment on time. Now, they will have a change to fix
that when people are filing their 2020 tax returns. If they didn't get
their full economic impact payment, they can file for what's called a
recovery rebate credit. And IRS is putting out information on how to do
that on its website. 

[Holly Hobbs:] So Jessica, we're entering year 2 of the COVID pandemic.
What challenges could IRS face in 2021?

[Jessica Lucas-Judy:] Well, as I mentioned they are still facing a
backlog from some of the returns and correspondence that came in during
the last filing season. And that's one of the things that we made a
recommendation about in our report--that IRS needed to update its
estimates for dealing with the backlog of work. They did not fully
incorporate all of the risks that came from the 2020 filing season, the
pandemic, the need to work remotely. Didn't fully incorporate that into
their assessment of risk. And we recommended that they do so. 

[Holly Hobbs:] So, it sounds like the IRS faced a number of challenges
caused by COVID-19, and that it made changes to help address delays in
processing tax returns. But that a number of challenges still remain for
the 2021 filing season. Jessica, since electronic filing seems to be
less impacted by the pandemic, is IRS doing anything to increase the use
of e-filing? 

[Jessica Lucas-Judy:] E-filing is definitely easier for most taxpayers.
And for the IRS and less costly, fewer opportunities for error. IRS
received and processed more electronic filed returns this past year than
in any other prior filing season. But we still found that the use of
electronic filing by businesses was low. So we recommended that IRS
identify and address any barriers to electronic filing for businesses to
try and address this moving forward. 

[Holly Hobbs:] So, did we make any other recommendations to IRS to help
it prepare for the 2021 tax filing season?

[Jessica Lucas-Judy:] One of the things we did recommend is that IRS
identify alternative work arrangements for stay who are on what they
call weather and safety leave. IRS was able to get laptops out and make
work portable for as many staff as it could. But there were still a
number of staff, particularly in their returns processing area, who were
on weather and safety leave and have not been able to work much since
the pandemic. And so, we made a recommendation that IRS try to identify
other types of work or work arrangements that some of those staff could
do to help it maintain operations. 

[Holly Hobbs:] And last question, Jessica--what's the bottom line of
this report?

[Jessica Lucas-Judy:] IRS, in general, did a great job adapting to the
pandemic. But they're moving into the 2020 filing season with a
significant backlog of payments and returns and correspondence, and a
number of staff who are still not able to work at full capacity. Our
report identifies 7 recommendation that IRS can do to help it better
prepare for 2021. Addressing the recommendations in our report will help
IRS provide better customer service and be able to process tax returns
in a timely way and get refunds out taxpayers are owed. 

[Holly Hobbs:] That was GAO's Jessica Lucas-Judy talking about a new
report that looked at how the IRS was impacted by COVID-19 and our
recommendation to prepare for the 2021 tax season. Thank you for your
time, Jessica! 

[Jessica Lucas-Judy:] Thanks very much!

[Holly Hobbs:] And thank you for listening to the Watchdog Report. To
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