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Preface: Introductory Remarks by the National Taxpayer Advocate 2020

Section 7803(c)(2)(B)(ii) of the Internal Revenue Code requires the National Taxpayer Advocate to submit this report each year and in it, among other things, to identify the ten most serious problems encountered by taxpayers and make administrative and legislative recommendations to mitigate those problems. In each of the ten Most Serious Problem discussions in this report, we are including an IRS narrative response. Our intent is to help readers see both TAS’s perspective and the IRS’s perspective on the source and nature of key challenges and potential solutions.

2020 Filing Season and Economic Impact Payments: The Good News

To say the least, 2020 was an extraordinarily challenging year for tax administration. I was sworn in as the National Taxpayer Advocate in late March — just as the COVID-19 pandemic was erupting and the IRS was closing facilities around the country to comply with local stay-at-home orders and social distancing guidelines. As we detail in the Filing Season Review section of this report, the IRS had to temporarily shut down its mail facilities, call centers, and Taxpayer Assistance Centers (TACs). As a result, paper tax returns and correspondence from taxpayers sat unopened in trailers for months, many taxpayers did not receive timely refunds, taxpayers could not get through to the IRS by phone (for context, the IRS received more than 100 million telephone calls during fiscal year (FY) 2020), and taxpayers could not obtain in-person assistance at TACs.

Adding to the IRS’s challenges, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on March 27, giving the IRS the responsibility to deliver more than 160 million stimulus payments, which the Treasury Department dubbed “economic impact payments” (EIPs). This was no easy task. Eligibility was subject to an income phaseout based on filed tax returns, yet millions of individuals who did not file tax returns were also eligible to receive EIPs. The IRS worked with the Social Security Administration and the Department of Veterans Affairs to obtain lists of beneficiaries and then integrated those lists into its own systems to pay benefits to individuals who did not have a filing obligation.

Despite these unprecedented challenges, the IRS generally performed well. In most cases, the IRS can effectively handle whatever it can automate, and this year was no exception. As of November 20, 2020, the IRS had received about 169 million individual income tax returns, and of those, about 153 million (91 percent) had been e-filed.

For taxpayers who e-filed, the IRS processed the overwhelming majority of returns timely and issued the resulting refunds timely. The same was generally true of EIPs — most eligible individuals received their stimulus payments timely and in the correct amounts. The IRS deserves much credit for its overall performance in 2020.

 

COVID-19 Challenges: The Bad News

Despite the IRS’s overall success in managing the filing season and accurately paying the significant majority of EIPs, some taxpayers experienced major problems, and the agency was not always fully transparent about its struggles. Four areas stand out:

  • Millions of taxpayers experienced lengthy delays in receiving their tax refunds.
  • Millions of eligible individuals did not receive some or all of the EIPs for which they were eligible.
  • Millions of taxpayers received late notices bearing dates that had passed and, in many cases, response deadlines that also had passed.
  • Public information about the status of IRS operations and processing backlogs was insufficient.

Taxpayer Rights and Service Assessment: IRS Performance Measures and Data Relating to Taxpayer Rights and Service

The Taxpayer Rights and Service Assessment has provided the IRS, Congress, and other stakeholders with a “report card” to measure how the agency is doing in protecting and furthering taxpayer rights and service while driving voluntary compliance. The Taxpayer First Act (TFA), passed in 2019, requires the IRS to include in its written comprehensive customer service strategy “identified metrics and benchmarks for quantitatively measuring the progress of the Internal Revenue Service in implementing such strategy.” Taxpayer customer service and taxpayer rights are inextricably linked, as evidenced by the right to quality service. The Taxpayer Rights Assessment will allow the IRS to identify areas where it must improve and measure the success of specific changes by comparing data before and after implementing the new customer service strategy. TAS looks forward to working with the IRS on the TFA implementation and future measures.

Highlights of TAS Successes on Our Journey of Taxpayer Advocacy Throughout the Past Year

To improve transparency regarding TAS’s advocacy activities, we are including a new section entitled “Highlights of TAS Successes on Our Journey of Taxpayer Advocacy Throughout the Past Year” in this report to highlight some of TAS’s accomplishments.