Rice: $19 Billion in Improper EITC Payments at IRS – Let’s Fix Underlying Problems & Customer Service
“I believe that the most significant unfairness facing American taxpayers right now is the lack of customer service at the IRS,” Republican Leader on the Ways and Means Oversight Subcommittee Rep. Tom Rice (R-SC) said in opening remarks before an Oversight Subcommittee Hearing.
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Rep. Rice’s full remarks as prepared for delivery appear below.
Thank you, Mr. Chairman.
And thank you to our witnesses for being here today.
I want to first take a moment to thank the employees at the IRS for their dedication to the agency’s mission. At a time of increased complexity brought on by changes to the tax code, the IRS undertook an unprecedented effort to organize and distribute hundreds of millions of Covid relief payments while suffering the same staffing issues as the rest of the world, all in the midst of a pandemic.
None of that has been easy, and we want to say thank you for your hard work and dedicated public service.
Now, the topic of taxpayer fairness across the IRS is important but it is also one that has been covered in this subcommittee many times.
I hope we can move beyond talking points and work on solutions.
I believe that the most significant unfairness facing American taxpayers right now is the lack of customer service at the IRS.
The IRS is sitting on around 13 million unprocessed tax returns and a total of over 26 million tax returns that are waiting, needing further IRS action.
At the same time, IRS phone service levels are near an all-time low. Making it nearly impossible to reach an IRS agent for help with tax or audit matters.
Many taxpayers have been waiting for resolutions to their tax filings and to receive long overdue refunds. This is unfair and needs to be fixed.
Now, I know we will hear from at least one of our witnesses about audit rates and EITC. Mr. Chairman, we’ve counted at least six prior hearings under your leadership that have touched on this audit rate issue.
And while it is a perfectly fine topic, a seventh hearing on this issue doesn’t seem designed to make progress towards a solution.
The GAO report indicates what we already know – there are administrative issues around the EITC.
The program has an annual improper payment rate of around 25 percent. In the latest fiscal year, the improper payment amount totaled $19 billion. That is a huge problem. And it necessitates more audits.
EITC is complex when it comes to claiming a qualifying child and producing the necessary documentation to establish eligibility.
This problem must be addressed. I’d like to see us work on solutions to address the drivers of the high EITC error rate, which is at least partially responsible for auditing a higher percentage of taxpayers receiving this credit.
Instead of criticizing the audit rate, let’s fix the underlying problem. Another hearing to cover the same talking points we have heard over and over again won’t accomplish anything.
I do wish we could have worked together in the commissioning of this report, Mr. Chairman.
I’d like to point out that the report leaves out important variables related to EITC that would better assist Congress in understanding the data.
These problems include the following:
Failure to adequately discuss the differences between EITC correspondence audits and traditional, in-person audits, and whether they even belong in the same data set.
Treating taxpayers claiming a refundable tax credit with a 25 percent error rate the same as tax returns from W-2 earners with a 99 percent voluntary compliance rate.
Failure to include the results of Secretary Mnuchin’s 2020 directive to the IRS to prioritize increasing audit rates for high-income earners.
And failure to adequately explain that the IRS received $1.86 billion in appropriations on top of its annual budget through Covid-relief legislation and the American Rescue Plan bringing its total funding to 2010 levels.
With that said, Mr. Chairman, there are real problems with the EITC administration, and Congress can play a role in trying to help solve those problems if we work together on creative solutions.
We need to think creatively about how to make the credit easier to administer and bring down the improper payment rate.
To say the IRS has a lot of room for improvement may be the understatement of the year.
From IT modernization, to improved taxpayer service, to some of the audit rate issues discussed in the GAO report, both the IRS and Congress have a role to play in improving this situation.
I hope we can move forward after this hearing and work together on solutions.
Thank you and I yield back.