Continued Assessment of the IRS’s Efforts to Address the Backlog of Its Tax Processing Operations
The overall objective of this review is to continue to assess the IRS’s efforts to address backlogs of work in its various Submission Processing functions both carried over from the 2020 Filing Season and additional backlogs resulting from the IRS’s inability to timely process tax returns and other tax account work received during the 2021 Filing Season. This review addresses the major management challenge of Responding to the COVID-19 Pandemic.
Review of IRS’s Customer Service Efforts to Assist Taxpayers With the Child Tax Credit Portal and Non-Portal Updates
The Treasury Inspector General for Tax Administration is initiating a review of the Internal Revenue Service’s customer service efforts to assist taxpayers in determining their eligibility and updating their personal information in order to qualify for advance payments of the Child Tax Credit. The American Rescue Plan Act of 2021, which became law on March 11, 2021, increases the amount of the Child Tax Credit from $2,000 to $3,000 per child under the age of 18 ($3,600 for children under 6). The American Rescue Plan Act also requires the IRS to develop an online portal, known as the Child Tax Credit Update Portal. Taxpayers that do not have access to the Internet will be able to contact the IRS using a dedicated phone line or visit a Taxpayer Assistance Center to either opt-out or update their information.
Assessment of the IRS Efforts to Prioritize and Reduce Consistent Accounts Management Overage Inventories
Accounts Management is responsible for assisting taxpayers with questions about the tax laws, their tax account, the status of their refund and responses to many IRS notices. Accounts Management’s ability to timely resolve taxpayer’s issues directly effects the customer service and experience provided to the taxpayer. Accounts Management has consistently had a high percentage of overage inventory for many years. The overage inventory has grown worse because of the IRS closures related to the Coronavirus Disease 2019 (COVID-19), which caused a backlog of mail at Tax Processing Centers and Campus Support sites. Because most of Accounts Management inventory is initiated by the taxpayer, delays in getting through the backlog of mail causes inventory to be overage before it makes it to Accounts Management.
Expanded Eligibility for the Premium Tax Credit
The Treasury Inspector General for Tax Administration is initiating a review to evaluate the Internal Revenue Service’s efforts to implement the Premium Tax Credit tax law changes affected by the American Rescue Plan Act of 2021. The American Rescue Plan Act of 2021, which became law on March 11, 2021, waives the repayment of any excess advanced Premium Tax Credit received by marketplace participants during Calendar Year 2020. Additionally, the American Rescue Plan Act increases the Premium Tax Credits for all income brackets for coverage years beginning in 2021 and 2022.
Implementation of Child Tax Credit Advanced Periodic Payments
The Treasury Inspector General for Tax Administration is initiating a review to evaluate the Internal Revenue Service’s actions to implement the legislative changes made by the American Rescue Plan Act (ARPA) of 2021 to expand the Child Tax Credit and issue advanced periodic payments. The ARPA, which became law on March 11, 2021, increases the amount of the Child Tax Credit from $2,000 to $3,000 per child under 18 years old ($3,600 for children less than 6 years old). The credit is fully refundable and a portion of it can be paid in advance to taxpayers. In addition, the Act requires the IRS to develop an online portal so that taxpayers can either un-enroll from receiving advanced periodic payments or update information such as marital status, number of qualifying children, etc. that would affect their eligibility for the Child Tax Credit and/or revise their advanced payment amounts.
Review of the Internal Revenue Service’s Development of the Child Tax Credit Update Portal
The Treasury Inspector General for Tax Administration is initiating a review of the Internal Revenue Service’s development of the Child Tax Credit Update Portal (CTCUP) that was included as part of the American Rescue Plan Act of 2021. The Act includes approximately $1.9 trillion in economic relief and stimulus to address the continuing impact of the coronavirus pandemic on the economy, public health, state and local governments, individuals, and businesses. It also contains numerous tax-related provisions intended to provide relief to individuals and businesses. These provisions will have a significant impact on IRS operations and Federal tax administration.
Expanded Child and Dependent Care Credit Eligibility
The Treasury Inspector General for Tax Administration is initiating a review to assess the IRS’s implementation of the expanded Child and Dependent Care Credit (CDCC) eligibility requirements. The American Rescue Plan Act temporarily expands the CDCC for taxpayers who work or are looking for work. The CDCC will be fully refundable for Tax Year 2021. The amount of the credit, rate used to determine the credit, and income phase-out limits increased significantly. In addition, the amount of employer-provided dependent care benefits has more than doubled. These changes make the CDCC the largest refundable credit.
Implementation of Sections 2303 and 2304 of the Coronavirus Aid, Relief, and Economic Security Act
The Coronavirus Aid, Relief, and Economic Security (CARES) Act temporarily repealed certain restrictions imposed by the Tax Cut and Jobs Act of 2017 affecting net operating loss carrybacks (NOLs), and altered other NOL rules. The objective of this review is to assess the Internal Revenue Service’s efforts to promote non-corporate business taxpayer compliance with Sections 2303 (relating to NOLs) and 2304 (relating to excess business losses) of the CARES Act.
Economic Impact Payment Tax Filing Reconciliation for Individuals
The objective of this review is to assess the IRS’s processing of the Recovery Rebate Credit claims during the 2021 Filing Season, including ensuring that taxpayers are properly reconciling advanced Economic Impact Payments received during Calendar Year 2020.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed into law on March 27, 2020 created a refundable tax credit, the Recovery Rebate Credit (RRC) of up to $1,200 per eligible adult and $500 for each qualifying child to be applied toward income earned during Tax Year 2020. The Consolidated Appropriations Act, 2021, enacted on December 27, 2020, created an additional RRC of up to $600 for each eligible individual and $600 for each eligible child. These Acts authorized the IRS to make advance payments of the credits using an individual’s Tax Year 2018 or Tax Year 2019 tax return.
Controls over Coronavirus Response Funding
Evaluate controls implemented by the IRS to ensure the $765.7 million in appropriated funds received for its Coronavirus response is adequately tracked and used for its intended purpose.