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Sunday, March 27, 2022

Law and Tech Modernization Needed to Get Tax Refunds To Taxpayers

 In recent years, a few weeks before April 15, the IRS issues a press release such as these two:

2021: IRS has refunds totaling $1.3 billion for people who have not filed a 2017 federal income tax return (IR-2021-75 (4/5/21))

2022: IRS has $1.5 billion in refunds for people who have not filed a 2018 federal income tax return; April deadline approaches (IR-2022-66 (3/25/22))

For 2021, the IRS estimated that 1,345,900 individuals were owed that refund (average of $966 per taxpayer).

For 2022, the IRS estimated that 1,514.627 individuals were owed that refund (average of $990 per taxpayer).

These news releases show the number of taxpayers and dollar amount per state. Presumably, these totals come from data, such as W-2 data, that the IRS has but without a filed return, cannot refund the tax withheld which the IRS is presuming would be refunded if the return was filed.

Why can't the IRS just issue the refund? The law doesn't allow it. I had an op ed in The Hill last year about the need - and capability, to modernize compliance and administration such that for many taxpayers, they would not even need to file a return. If payroll and similar data, most of which is already digitized, could be used to determine a taxpayer's tax liability at any point in time, the IRS / technology would just issue the refund.

And we know the IRS has the capability to issue payments as evidenced by three rounds of economic impact payments since March 2020, the advance child tax credit for 2021, and millions of other tax refund situations. 

The law should be changed to allow the automatic return of withholdings to individuals after the IRS runs its check based on information reports it has for the person. Or send each a reminder 13 months in advance of the expiration of the statute of limitations to have the individual confirm their income. But the tech solution would be best as it allows for more improvements beyond the return of taxpayer money to the taxpayers.

What do you think?

#letsfixthis


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