At Senate Finance Hearing, Portman Discusses the Need for the IRS to Fix Backlog

Commissioner Rettig Agrees IRS Needs Reform, Better Technology, Accountability for Taxpayers

April 7, 2022 | Press Releases

WASHINGTON, DC – Today, U.S. Senator Rob Portman (R-OH) questioned IRS Commissioner Charles Rettig about the delay in millions of taxpayers’ tax returns. Portman highlighted the stories he has heard about small businesses unable to secure loans due to not having a processed tax return. Commissioner Rettig agreed with Portman on the need to address the processing backlog, and Portman noted his bipartisan work with Senator Ben Cardin (D-MD) on IRS reform, including the Protecting Taxpayers Act, which was included in the Taxpayer First Act. Portman is currently working to authorize funding for customer service, as well as an overhaul of the Individual Masterfile and to begin revamping the Business Masterfile. In addition to the strong focus on IRS customer service, Senator Portman is working to increase the amount of funding for low-income taxpayer clinics (LITCs), create an IRS Strategic Transformation Office, deploy 2D technology on paper returns to prevent future backlogs, provide direct hiring authority to help get employees on boarded more efficiently, and ensure all IRS applications have audit trails to protect taxpayer information. 

A transcript of his remarks can be found below and a video can be found here.

Senator Portman: “Thank you, and congratulations to you Ranking Member Crapo for the great vote we just had on making sure that Russia doesn’t have access to our market; it’s a privilege, not a right. Under low tariffs that they get under PNTR – it was a 100 to nothing vote, and it was a vote in favor of the people of Ukraine and to tighten up the sanctions on Russia. And, I know, although it looks easy, at the end it wasn’t.  So congratulations.

“Commissioner, thank you for being with us today. You and I had a good conversation prior to this hearing about one of my major concerns, which is the fact that we have so many unprocessed returns out there. I think that we have gone from 17 and a half million returns that have not been processed to a backlog of about 11 million returns. 11.5 million as of March 25. That’s progress since our last meeting, but obviously we have a huge backlog. And as you know, I think that I have talked about it and I know that others have raised this with you as well – we have small businesses in Ohio as an example that are still waiting for their refunds from a year and a half ago. And we have people – individuals – telling me ‘hey I can’t get a loan because I have got to be able to show I have a processed tax return in order to get a loan.’ So this is having a real world impact out there, and obviously we all have concerns about this backlog. As you know, Senator Cardin and I have worked with you and your predecessors on IRS reform – actually for the last decade and a half or almost two decades.

“And our latest one is Protecting Taxpayers Act, which was included in the Taxpayer First Act. We have another bill we are looking at to provide additional funding for customer service from the IRS that I think that American taxpayers deserve, as well as an overhaul of the Individual Masterfile and to begin revamping the Business Masterfile as well. We would require 2D scanning of paper returns to help prevent future backlogs. That’s basically putting a barcode on every return so you can process them much more quickly. Increase the amount of funding for these low-income taxpayer clinics that are over-utilized now. Provide direct hiring authority to help get employees on board more efficiently, which I know you value. We also, as you know, revamped the Oversight Board, which was in our first legislation – IRS Oversight Board and request regular reports to Congress and the Inspector General recommendation for IT audit trails on IRS applications to increase the protection of taxpayer data.

“Anyway, talk to us about what that would mean. Do you think this would help in terms of addressing the backlog and preventing future ones? And a specific question for you: ‘Does the current budget proposal include funding to completely update the individual Masterfile?”

Charles Rettig, U.S. Commissioner of Internal Revenue: “The current budget proposal does not include sufficient funding to update the Masterfile entirely, and it’s been as all of you are aware, a long term project for the agency. We want to, we need to get there. We are, myself included, but every employee of the Internal Revenue Service – I think every American is supportive of funding and bringing oversight. IRS and the technology space to be able to provide the services that every American deserves, and I think the vote that you all had today shows that we are the greatest country in the world. We should provide that level of service to our people. And, you know a blend between employees, who I think in the IRS, are spectacular, and I can’t say enough the quality of the people and the desire. But we need to provide them the right tools and training and technology.

“Technology will change the skill sets so the direct hiring authority – what we use it for – will change as we bring on technology. We are going to ask, in the direct hiring authority arena, for direct hiring authority beyond what we just received, which is, in some of our specialist type positions, the more sophisticated examiners – we have a very difficult time bringing those people on board when they’re told its going to take six to nine months or something to get them on board. So, one of the comments Senator that you made is direct hiring authority in this space, and as we discussed prior to today, will get you what we believe would be critical for us to do what we need to do.”

Senator Portman: “Yeah what we talked about, we need the specific positions that you need direct hiring for, what your priorities are—and if you could just answer my initial question also Commissioner. Do these various reforms I talked about, including the customer service funding increases, but also the 2D scanning of paper returns and overhauling the individual Masterfile – will this help in terms of the backlog?”

Commissioner Rettig: “It will absolutely help in terms of the backlog and numerous other functions within the Internal Revenue Service. It’s critical that we receive this.”

Senator Portman: “Great, well thank you for that and thank you for getting the additional information on the specific positions for which you think direct hire is most important. We want to help here, and as you said it’s all about the taxpayer. My time has expired – I am going to give you a question for the record on foreign tax credits, and I know you just released your final regulations on that and I have some concerns and I will be following up with you on that. Thank you Commissioner and good luck on the filing season.”