Weekly Column: Tax Filing Complexities Highlight The Need For Easing Idahoans' Tax Filing Burdens
Guest column submitted by U.S. Senator Mike Crapo
Tax filing season and Economic Impact Payment issues are the most frequent federal tax-related topics I hear about from Idahoans. Since coronavirus relief programs have resulted in extra paperwork for taxpayers this year and nearly constant updates of tax preparation systems, I called for extending the federal tax filing deadline, now set for May 17.
Amid the extended tax filing season, the Senate Finance Committee, on which I serve as Ranking Member, held a hearing with IRS Commissioner Charles Rettig. The past year brought unprecedented challenges, and the IRS’s role as our nation’s tax collector has expanded to also delivering economic recovery. This included distributing more than 150 million Economic Impact Payments and implementing various temporary tax incentives to keep employees on payroll; guarantee paid leave for employees who contract COVID-19; and help for taxpayers to weather the pandemic.
I stressed to Commissioner Rettig the importance of getting this right for Idahoans and all Americans. Reports of a backlog of millions of unprocessed tax returns from last year’s filing season are extremely concerning. Millions of taxpayers are waiting longer to receive refunds in the middle of a pandemic. IRS call center wait times remain unacceptably long. Many taxpayers have been sent confusing automated notices indicating they have not yet filed their return, when it was filed but not yet processed. Massive fraud in unemployment compensation programs has also generated confusion. This situation results in a double penalty for taxpayers: slow return processing while being threatened with higher future taxes from the Biden Administration’s tax increase proposals.
I also emphasized the importance of the IRS communicating effectively regarding a temporarily-expanded Child Tax Credit (CTC) program. The CTC has long enjoyed bipartisan support. However, a recently-enacted expansion of the program will allow lower income parents to receive a portion of their CTC periodically throughout the year, rather than as a larger refund during tax filing season. As many as 1 million low-income parents, who currently have no requirement to interact at all with the IRS, will need to file an annual tax return, and to notify the IRS throughout the year of any changes in income or family status to receive their full credit payment. Non-partisan tax experts have suggested it would take 12 to 18 months for the IRS to set up fully such a program. The IRS is being rushed to meet an unrealistic July 1 deadline for issuing initial payments, leaving the door open for mistakes, confusion and fraud. The IRS should not rush to send payments before obtaining accurate eligibility information.
Doubling of the CTC was among the many benefits of tax simplification in the Tax Cuts and Jobs Act, enacted in 2017. In addition to reducing tax filing complexity, the law lowered tax bills for Idahoans and millions of families across our nation. The TCJA was fueling remarkable economic growth in the U.S. before the pandemic. With the TCJA in place and an agenda focused on smart regulation, we saw progress along many dimensions, including: 50-year lows in overall unemployment; robust wage gains skewed toward lower-wage earners; record high household incomes; and record low poverty.
To return our economy to its pre-pandemic strength, bipartisan efforts should build on the TCJA’s successes, rather than undermining them by increasing the tax burden on Americans. We are also approaching two years since Congress passed the Taxpayer First Act—a bipartisan law to enhance taxpayer protections, modernize the IRS’s structure and improve its customer service. I continue to stress the importance of fully implementing these reforms and ushering forth a 21st century IRS truly putting Idaho and all taxpayers first.
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