A chronic staffing shortage at the Internal Revenue Service threatens loan applications from New Hampshire small business owners seeking relief from COVID-19 losses, according to a hospitality industry leader.
In response to the pandemic, Congress more than tripled what small companies could receive from Economic Disaster Impact Loans, from $150,000 to $500,000.
Steve Duprey, a real estate and hotel developer, told U.S. Sen. Jeanne Shaheen, D-N.H., that new program rules require the federal Small Business Administration to get certification from the IRS that the loan applicant has no outstanding tax issues.
With the deadline for applications at the end of this month, many business owners have been unable to get IRS clearance to complete the process, Duprey said.
During a virtual meeting Wednesday hosted by the Concord Chamber of Commerce, Shaheen said the IRS crunch is affecting many relief efforts.
What made the agency’s job harder was that Congress tasked it to do many additional jobs during the pandemic, including processing all federal stimulus checks, she said.
“So many people are out of the office, working at home, there are not as many taxpayer advocates,” Shaheen said. “We need to get some more personnel in there.”
35 million tax returns
The IRS is facing a backlog of more than 35 million unprocessed tax returns as of the end of the 2021 filing season in May — a paperwork clog that’s four times bigger than it was in 2019 before the pandemic.
The National Taxpayer Advocate, an ombudsman agency within the IRS, said in a recent report to Congress that the IRS has only had enough funding to reach a 60% level of service.
The IRS received more than 85 million calls for help with individual tax returns in 2021, up 978% from three years ago.
The NTA analyzed IRS call data and determined just 3% of those who contacted the agency through its most-popular toll-free number spoke with a human being.
The Treasury Inspector General for Tax Administration also reported last month that 8 million individual tax returns remained to be processed at the end of last year.
That was a 1,200% increase, made worse because millions of pieces of unopened mail during the pandemic piled up in trailers parked outside IRS centers, and the agency spent months trying to catch up with it.
The economic disaster loans, which carry a borrowing term of 30 years, are for losses during the pandemic through April 6.
All eligible businesses must pay back the loan with 3.75% interest. Nonprofits could receive the loans would play 2.75%.
Robert Henson, an economic legislative assistant in Shaheen’s office, urged Duprey to contact the SBA loan specialist assigned to his case.
“This is not unique. We are aware of a number of programs where applicants have requested verification from the IRS and are awaiting an answer,” Henson told Duprey. “If you have been assigned a loan specialist at SBA, that’s a positive sign. Continue to be in regular touch with that person.”
Congressional fix?
Shaheen said she will further study Duprey’s issue and pledged, if need be, to lobby for legislation to extend the deadline on these loans.
The importance of proper staffing of the IRS took on renewed importance when a bipartisan group of 20 senators, including Shaheen, announced at the White House a deal on the outline of a $579 billion infrastructure bill.
Senate Republicans opposed the tax increase on the wealthy that President Joe Biden had first proposed to pay for the program.
Shaheen said Senate negotiators agreed to support paying for the bill in part by empowering the IRS to close the so-called “tax gap” that represents the difference between what the agency received in federal taxes and what their experts say was owed.
Estimates are this could raise $100 billion, though some analysts, including those with the nonpartisan Urban-Brookings Tax Policy Center, said it will take time to train IRS staff and develop new anti-fraud techniques.
Shaheen said many constituents worry when Congress considers putting more tax experts on the IRS payroll.
“I know a lot of people are concerned when they see that, because they think that means the IRS is going to go after them to pay more taxes,” Shaheen said.
“It is our responsibility to make sure they don’t do that, unless there is reason to believe individuals aren’t paying the taxes that are owed.”
