House Committee Holds Hearing on IRS Pandemic Response

The House Committee on Oversight and Reform held a hybrid hearing on October 7, 2020 called “IRS in the Pandemic” during which they discussed IRS operations during the COVID-19 pandemic, the financial state of the IRS, and the status of information technology (IT) within the organization.

Disinvestment in the IRS over the course of several years has led to a 30% shortage in staffing since 2000 and legacy systems that date as far back as the Kennedy Administration, according to Committee reports. The pandemic highlighted the importance of the IRS as the Service prepared to send out millions of economic impact payments, or stimulus payments, to Americans as well as process tax returns from the previous year during a crucial time.

Many paper tax returns have yet to be processed. This backlog is a result of legacy systems, many of which the IRS is unable to effectively track and manage.

Representative Jody Hice (R-GA) said during the hearing, “Some of these older IT systems, they are very complicated and they are going to require modernization. Without modern technology systems that can meet modern day challenges, our agency missions are at risk and taxpayer resources will continue to be spent on archaic and inefficient technology systems of ages past.”

IT modernization is a recurring theme in most federal agencies. This hearing focused on the IRS due to their crucial role in providing relief during the pandemic. An example of when legacy systems hurt the IRS’s ability to deliver services to the American people was highlighted by Rep. Carolyn Maloney (D-NY) who said, “A few months into the pandemic, we discovered that the IRS sent roughly 1.4 billion in EIPs to dead people. Some of my constituents told me that they received EIPs for their dead relatives and were still waiting for their own checks. While the IRS had access to the Social Security Administration's death file, the Treasury Department's Bureau of Fiscal Service, which distributes the payments, did not.” This is an oversight that could have been avoided by integrating databases and improving modernization in the IRS.

Taxes on the wealthy were another issue during the hearing Rep. Gerry Connolly (D-VA) explained, “When the IRS collects taxes each year, it relies heavily on taxpayers to report their income and calculate the amount of tax they owe. Some taxpayers, however, often the most wealthy among us…fail to properly pay their taxes. They hide earnings, claim dubious deductions…and they fail to properly pay their taxes as a result.” He then called for a need for the IRS to augment its auditing capabilities which would result in $7.5 trillion in taxes to be properly collected over the next decade.

Vijay D’Souza, a director in the Government Accountability Office (GAO) Information Technology and Cybersecurity team, testified on GAO’s analysis of the IRS’s IT capabilities. He emphasized that while the IRS has made some strides in IT, the budget has remained relatively flat and as a result there are many issues that need to be addressed.

First, he said, “we identified 18 new cybersecurity recommendations. Including these new recommendations, a total of 132 cybersecurity recommendations remain outstanding.” Second, “we reported on computer problems IRS customer service representatives experienced that caused some taxpayer phone calls to disconnect mid call. We recommended, and IRS agreed, that it should both identify the causes of this problem and track the resulting downtime.”

Finally, D’Souza highlighted the IRS’s 50-year-old programming language, saying, “We reported that IRS could only capture certain business tax information in PDF format, which is harder for it to use than other electronic open data formats. These other formats would better allow the agency to analyze information in these returns for enforcement and other analytic activities. We recommended that IRS consider the costs and benefits of converting this information.”

The IRS has room for improvement within its IT functions. The hearing highlighted how proper customer service management and effective use of resources could be crucial to the advancement and success of the IRS.