Our Inefficient Federal Government

Our Inefficient Federal Government

© David Burton 2022

Government Inefficiency

     In September 2022, my wife and I decided to replace a bank Certificate of Deposit (CD) of hers - which was paying less than 1% in interest - with a U.S. Treasury I-Bond - which was paying around 10% in interest at the time.

     In order to do this, we needed to open up a TreasuryDirect account for my wife. I went to the TreasuryDirect web site and proceeded to fill out the on-line form for the new account. The process took about 10 minutes. In reply, I received the following response.

     “Dear Account Holder,
     “Thanks again for opening a TreasuryDirect account.
     “Unfortunately, we are having difficulty verifying the information you provided when opening your account. As a result, a hold has been placed on your account for your protection.
     “You must mail a completed Account Authorization form before you will be able to access your account.
     “For your protection and to help resolve any access issues with your account, please complete the Account Authorization form (FS Form 5444) located at https://www.treasurydirect.gov/pdf/rs/acctauth.pdf and have your signature certified as described in the form's instructions. Please note, Notary Public certification may also be accepted.
     “You can also watch the TreasuryDirect instructional video on how to complete this form at https://www.treasurydirect.gov/indiv/tools/account-authorization.htm.
     “Mail the completed form to Treasury Retail Securities Site, P.O. Box 9150, Minneapolis, MN 55480-9150.
     “Your new account number is {x-xxx-xxx-xxx}.
     “You will not be able to access your account online until we approve your mailed account authorization form. We are unable to answer questions about your account or the status of your submitted account authorization form over the phone or by email until your account authorization form is processed.
     "After we receive and approve your account authorization form, the hold on your account will be removed. The average approval takes up to 13 weeks from when we receive the form, but may be longer based on the volume of forms we receive.
[Emphasis mine] You will be notified by email when your account is authorized and ready to access. When you log into your account, check the Investor Inbox section of your TreasuryDirect account for an important message.
     “To ensure continued delivery of TreasuryDirect related information to your e-mail inbox, please add the "From" address Treasury.Direct@fiscal.treasury.gov to your address book.”
     Thank you for using TreasuryDirect.”
(Ref. 1)

     What in heaven’s name is going on at the U.S. Treasury? My wife has never had her identity questioned. She has numerous valid identifications - a driver’s license, bank accounts, a valid Social Security account, paid her income taxes for the past six decades, voted in the last fifty-plus elections, and much more! Why won’t she be able to access her account online until TreasuryDirect is able to answer questions about her account or the status of her submitted account authorization form over the phone or by email until her account authorization form is processed. What crime is she suspected of committing? Why can’t TreasuryDirect just tell us what the problem is so we can resolve the problem? My wife and I can instantly respond by phone, e-mail or text message!

     After the U.S Treasury receives and approves our completed account authorization form, the hold on my wife’s account will be removed. BUT,the average approval takes up to 13 weeks or longer – THAT’S FOUR MONTHS - from when they receive the completed form, but it may be longer based on the volume of forms they receive!

     While the Treasury Department doesn’t have the resources to process a simple request to open an account in a timely fashion for an ordinary citizen, the Biden administration is pouring 80 billion dollars into the Internal Revenue Service (I.R.S.) to significantly increase its manpower.

     “It has been called President Biden’s ‘shadow army,’ described as a strike force to shake down small businesses with assault rifles and likened to a militia of auditors on search-and-destroy missions.
     “A decades-long Republican antipathy toward the Internal Revenue Service has reached a new level of enmity with the passage of {the} Democratic-backed bill that gives the agency $80 billion to beef up its ability to go after tax cheats. The legislation, which Mr. Biden signed into law . . . , will allow the beleaguered agency to hire more than 80,000 employees . . .” (Ref. 2)

     Republicans, who have long accused the I.R.S. of unfairly targeting conservatives, have seized on the law to fan conspiracy theories about the threat that mom-and-pop shops and middle-class Americans will face from an emboldened tax collector.

     “I think they’re going after middle-class and small business people,” said Republican Senator Chuck Grassley of Iowa. “With 87,000 additional employees, you can imagine what that harassment is going to be to middle-class Americans and our small business people.” [2]

     With the infusion of the new money, the I.R.S. is beefing up its staff to keep pace with the growth in the number of taxpayers and to replace departing employees. The Biden administration expects that about 50,000 I.R.S. employees will retire within the next decade and that the agency will hire 87,000 new employees, bringing the overall size of the agency to around 120,000. The number of enforcement agents is expected to double to about 13,000 from 6,500 over the next decade. Republicans have been eager to fan fears about a scaled up I.R.S. ahead of midterm 2022 elections, which will determine which political party controls Congress.
     Representative Kevin Brady of Texas, the top Republican on the House Ways and Means Committee, said that families making less than $75,000 annually would face 710,000 additional audits, suggesting that the Biden administration had lied about its pledge to not increase audit rates of taxpayers who make less than $400,000. Mr. Brady also suggested that the I.R.S. would have to target middle-income families to generate the kind of tax revenue that it has assumed the new law will generate. “Middle-class families ought to be frightened,” he said on Fox News.
     The 87,000 hires were described on various social media platforms as “thugs” and “terrorists” and likened repeatedly to the Gestapo and the K.G.B. Some took to calling the I.R.S. an “army.” [1]

     Did a shiver go down your spine when you heard that Congress is pouring a whopping $80 billion into the Internal Revenue Service over the next 10 years to beef up the nation’s tax collection system? To borrow from President Reagan, among the most dreaded words in the English language are: I’m from the I.R.S. and I’m here to audit your taxes.
     Who will all these new I.R.S. agents be going coming after? The answer to that is a little like what the notorious bank robber Willie Sutton is supposed to have said when somebody asked him why he robbed banks: “Because that’s where the money is.”
     Contrary to what politicians sometimes say, those bureaucrats in Washington are not dumb. The I.R.S.’ assignment is to collect all the money Washington is entitled to under existing law. So, like Sutton, they go where the money is: the very high-income individuals, partnerships and corporations.
     Those taxpayers also have batteries of lawyers and accountants to help them slip around the rules in ways that only equally skilled I.R.S. experts can combat.
     The nonpartisan Congressional Budget Office (CBO) estimates that the new funds will enable the government to collect about $180 billion over the 2022-2031 period.
     Like my current experience with the Treasury Department, customer service at the I.R.S. has also been abysmal. In the most recent tax filing season, I.R.S. employees answered less than 15% of calls from taxpayers, said a senior Treasury official.
     And a lot of taxpayers, and not just those who file with paper forms instead of electronically, have to wait while their returns are entered into the I.R.S. system.
     Although most of the new funding will go toward enforcement, tens of billions will be used to upgrade telecommunications and IT systems. All of that should make the I.R.S. more responsive. [2]

     Maybe some of that $80 billion slated for the I.R.S. should go to the Treasury Department instead so that investors shouldn’t have to wait some 13 weeks or more to get their accounts opened!

     As a consequence of the increase in I.R.S. funding, small business owners may soon be in for a lengthy and expensive battle with the I.R.S., tax experts warn.
     A key provision in the Inflation Reduction Act - which throws the extra $80 billion to the I.R.S. to improve the agency’s collection of under-reported income - will end up targeting small business owners to pay for the legislation, according to nonpartisan watchdog the Joint Committee on Taxation.
     The group estimates that between 78% and 90% of the estimated additional $200 billion the I.R.S. will collect will come from small businesses making less than $200,000 annually.
     Just 4% to 9% would come from businesses making north of $500,000 a year - meaning the reality of the legislation is in sharp contrast to President Biden’s longstanding claim that he wouldn’t raise taxes on anyone making less than $400,000.
     “The I.R.S. will have to target small and medium businesses because they won’t fight back,” Joe Hinchman, executive vice president at National Taxpayers Union Foundation, told The New York Post. “We’ve seen this play out before . . . the I.R.S. says ‘We’re going after the rich’ but when you’re trying to raise that much money, the rich can only get you so far.”
     In fact, going after the lower and middle class can actually be more lucrative for I.R.S. auditors than trying to get more money from the wealthy. “The rich have their lawyers and fight it — that’s why the poor are easier to go after,” Hinchman added.
     Accordingly, tax experts warn that the I.R.S.’s audits will be far more painful and costly for small business owners — even for those who think they’re filing their taxes correctly.
     “Most small business aren’t doing anything wrong,” Daniel Bunn, executive vice president at the Tax Foundation, told The Post. “We don’t make the tax code simple and the complicated tax code makes it difficult for small business owners to comply with all the requirements.”
     Even if small business owners get everything right, they may still be faced with a headache since part of the I.R.S. expansion will involve sending out more notices and letters to businesses, Bunn added. For individual contractors or small businesses, an I.R.S. letter that they owe more money or made an error on their taxes can put them underwater.
     “Anytime you get {an} I.R.S. letter, it could take months or years to get it settled - we’re talking many thousands of dollars to address,” Bunn added. “Large companies have constant reviews and lawyers going through everything . . . small business doesn’t have the resources to fight back in {that} way.”[3]

     My recent problem with the Treasury Department is not new nor is it unique. Back at the start of 2022, the Treasury Department announced that it was “facing significant challenges this year”. Officials warned that many taxpayers could see significant delays in receiving their tax refunds in 2022.
     As of 23 December 2021, the I.R.S. had a backlog of more than 8 million returns. The previous year, the I.R.S. ended the tax filing season with about four times as many unprocessed returns as they had the year before. Simply put, things at the I.R.S. were – and still are - extremely backed up.
     Then – as now – it was reported that taxpayers should be prepared to have trouble reaching the I.R.S. for support should they encounter an issue with their taxes or with simply applying to the Treasury Department for an I-bond account.
     A survey by the National Taxpayer Advocate showed that only 9% of calls to the I.R.S. were answered at all.
     While the I.R.S. has spoken at length about its staffing and fulfillment issues, it didn’t give a specific timeline for how long its problems would persist. It’s quite likely that their guidance will continue to be relatively vague.[4]

     The 2022 Treasury Department inefficiencies were so severe, that members of Congress complained.

     “After encountering unnecessary hurdles when helping constituents resolve delayed tax return cases, Congressman Dave Joyce (OH) {wrote} to Internal Revenue Service (I.R.S.) Commissioner Charles P. Rettig and Treasury Secretary Janet Yellen to request answers on how they plan{ned} to manage the I.R.S.’ processing backlog during the current 2022 tax filing season.
     “ ‘My office has received dozens of requests from constituents asking for help with challenges they’re facing with the I.R.S.,’ said Joyce. ‘Ohioans don’t need to be burdened with additional unwarranted surveillance and auditing. They simply need the I.R.S. to manage its current workload effectively and on time. Rather than asking Congress for tens of billions more dollars for enforcement, I ask that Treasury work with the I.R.S. on a plan to reduce the ongoing processing backlog. The uncertainty brought on by this backlog and the delays it causes places a real strain on Ohio families and businesses, particularly those living on the margins.’ ” (Ref. 5)

     Parts of the U.S. federal government are grossly inefficient! The fact that the average approval time for a simple review of a request to open an account with the Treasury Depart can take 13 weeks or more bears out this fact! The fact that, in the most recent tax filing season, I.R.S. employees answered less than 15 percent of calls from taxpayers bears out this fact! Clearly, providing service to the ordinary citizen of this country is not a high priority for some deprtments of our federal government.

  1. More Money for I.R.S. Spurs Conspiracy Theories of ‘Shadow Army’, Alan Rappeport and Tiffany Hsu,
    The New York Times, 19 August 2022.
  2. The I.R.S. is getting a lot more money for audits. Should you be worried?, Don Lee, yahoo!news,
    14 September 2022.
  3. 80% of new I.R.S. revenue will come from small businesses earning under $200K: tax experts, Lydia Moynihan, New York Post, 3 August 2022.
  4. Many Tax Refunds Will Be Delayed, Treasury Says: How to Get Yours Sooner, Sam Lipscomb, yahoo!finance, 11 January 2022.
  5. Joyce Calls on Treasury, I.R.S. to Address Processing Backlog, Office of Congressman Dave Joyce of Ohio,
    1 February 2022.

  29 September 2022 {Article 547; Govt_96}    
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