There’s a paper jam at the IRS. The Treasury Inspector General for Tax Administration (TIGTA), in a recent interim report on the 2021 tax filing season, finds that a “lack of functioning printers and copiers contribute to the inability to reduce backlogs” at the IRS. TIGTA found that 42 percent of printers and copiers used at processing centers are either unusable or broken. A new contractor started at the agency in October but may not have been coming to the sites to replace the old printers due to COVID-19 concerns. The IRS says it’s working on the issue.
Once the jam clears, about 7.3 million people are likely to get refunds for taxes they paid on some 2020 unemployment benefits. The American Rescue Plan allowed those with modified adjusted gross income of less than $150,000 to exclude from their 2020 taxable income the first $10,200 in unemployment benefits they received last year. According to TIGTA’s report the IRS processed 7.3 million tax returns that qualify before the ARP became law in March. The IRS will start issuing refunds this month.
Or later: IRS backlog continues to grow, waits for refunds will likely grow. National Taxpayer Advocate Erin Collins told CBS MoneyWatch that the backlog of tax returns yet to be processed by the IRS has grown by 2 million since mid-April. Some are from tax year 2019, but many are from 2020. Contributing to the slowdown: The IRS has flagged about 29 million returns for manual review. She identified one specific issue where some filers are incorrectly filling out a line on Form 1040 that allows them to adjust their stimulus payments.
Speaking of the IRS. Former Commissioner Fred Goldberg will be this week’s guest on TPC’s The Prescription. He’ll be talking about the Biden Administration’s plan to boost the agency’s enforcement budget and require additional information reporting.
Sullivan: “SALT cap is a poor way to tax the rich.” TaxNotes’ Martin Sullivan argues for repealing the federal $10,000 cap on state and local tax (SALT) deduction. What’s needed: Improving income measurement as a way to increase taxes on high income households. “Instead of scattershot and arbitrary caps on what may be legitimate deductions… look at the current tax system for instances in which high-income individuals are receiving unjustified tax advantages or where their income is effectively taxed at lower rates.”
On the Hill this week. Speaking of taxing the rich, the House Ways & Means Subcommittee on Select Revenue Measures holds a hearing on “Funding our nation's priorities: reforming the tax code's advantageous treatment of the wealthy” on Wednesday, May 12.
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