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Americans could do taxes for free in just minutes — like other countries — but the IRS has been 'starved' of resources, the Treasury says

IRS on mobile smartphone
IRS Logo viewed on smartphone. Photo Illustration by Igor Golovniov/SOPA Images/LightRocket via Getty Images

  • Americans could do their taxes in minutes if the IRS had more funding, a Treasury official said.
  • The official cited how Estonians can file returns in five minutes; some Swedes can file via text message.
  • The Treasury is pleading with Congress for more IRS funding to help it modernize.
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Tax bills are due today — but the Treasury Department says the IRS needs more than your return to run at full capacity.

In a blog post, Natasha Sarin, the Treasury's counselor for tax policy and implementation, once again laid out some of the challenges facing the underfunded agency.

Sarin points to the example of other countries to look at what an "adequately funded tax administrator" would mean for Americans. For instance, Sarin writes, "in many developed countries, tax filing is simple and costless." Sarin cites the Atlantic's reporting that the average Estonian spends just five minutes doing taxes — and that it's even easier in Sweden, where many taxpayers just have to reply "yes" to a text message to confirm their taxes.

On the other hand, the IRS is still opening mountains of paper returns by hand, and running out of crucial everyday items like carts and staples.

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"Today's deadline is an inflection point in what has been the agency's most challenging filing season in recent history," Sarin wrote. "This is the byproduct of chronic underfunding that has starved the IRS of the tools it needs to serve the American people, coupled with a historic pandemic that introduced new responsibilities alongside mammoth challenges."

For months, the Treasury department — and the IRS's own commissioner — have been sounding the alarm bell on how understaffed and underfunded the agency is. According to the Tax Policy Center, the IRS' budget has shrunk by over 20% in the last decade, much of it due to Republican-led budget cuts. At the same time, demand — as measured by returns — has ramped up by 19%, according to national taxpayer advocate Erin Collins. Staffing is also low: Sarin writes that the agency's workforce is at "1970s levels."

That's led to a historic backlog of tax returns. The IRS was still sitting on 6.2 million unprocessed individual returns at the end of 2021, according to IRS watchdog Collins. The IRS has been making a dent in that, slowly but surely. On April 7, IRS commissioner Chuck Rettig testified at a Congressional hearing that the agency now had 2.7 million paper returns filed in calendar year 2021 sitting in inventory.

Those delays have left millions of Americans waiting on their tax refunds for months. Some taxpayers told Insider that missing checks have meant they're having trouble affording groceries, childcare, or even their homes.

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Democrats sought to ramp up IRS funding as part of their defunct Build Back Better legislation. They set aside $80 billion meant to help the IRS hire additional auditors and employees capable of sorting through a hefty backlog of paper returns. But the House-approved bill stalled out in the Senate due to resistance from at least one centrist when Democrats needed unanimity to pass it. 

The IRS remains a perennial target for conservatives wary of tax increases. Sen. Rick Scott of Florida released a Republican platform last month that urged slashing the agency's budget by half. It prompted IRS Commissioner Charles Rettig to tell House lawmakers last month that "you might be better off and save more money by just shutting it down completely" if that was implemented.

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