By David van den Berg

Law360 (March 25, 2020, 7:19 PM EDT ) As the IRS is tasked with overseeing stimulus payments to Americans under Congress' planned COVID-19 relief bill, the agency may struggle due to existing budget constraints and much of its workforce working remotely.

Under H.R. 748, the Coronavirus Aid, Relief and Economic Security Act, the Internal Revenue Service would send $1,200 payments to individuals and $2,400 payments to couples filing joint tax returns "as rapidly as possible," according to a draft of the bill. 

The IRS' new responsibilities would come as the agency is cutting half its staff at mission-critical locations in the interest of social distancing because of the novel coronavirus pandemic. It also is asking all its employees who are eligible to do so to work remotely. That's on top of the years of budget cuts and reduced staffing that have left the IRS with severely strained resources.

Treasury's original plan for the payments envisioned them being sent out by April 6. But it may be tough to get the payments out timely, according to former IRS Commissioner John Koskinen, who served in that role from December 2013 to November 2017.

"This is an acknowledged national emergency, and I am confident the agency will respond to whatever the final request is, although it could take a little longer than some are predicting and everyone would like," Koskinen told Law360. 

Under the Senate proposal, all U.S. residents with adjusted gross incomes of up to $75,000, or $150,000 for married couples, and who aren't a dependent of another taxpayer and have a work-eligible Social Security number would be eligible for the full $1,200 rebate, or $2,400 for married couples, according to a summary of the bill released by Senate Majority Leader Mitch McConnell, R-Ky. Payments would be increased by $500 per child, even for people without income as well as people whose income is entirely from nontaxable, means-tested benefit programs such as supplemental security income, according to the summary.

The IRS will use a taxpayer's 2019 tax return if it's been filed, or the 2018 return in the alternative, in determining the rebate checks. For each $100 the taxpayer's income exceeds the phase-out threshold the rebate drops by $5, and amounts are completely phased out for single filers with incomes over $99,000, for head-of-household filers with one child with incomes over $146,500, and for married couples filing jointly with no children at incomes over $198,000, the summary said.

Thanks to significant increases in electronic filing in recent years, Treasury's Bureau of the Fiscal Service should be able to distribute about half the payments through direct deposits and start sending those payments "within a matter of a few weeks," according to a Republican Senate Finance Committee aide who spoke to reporters Wednesday on the condition of anonymity. Paper checks may take a bit longer, since the bureau can process only so many at a time, so those may take four or five weeks to send, the aide said.

The agency's principal tasks in administering the payments will be programming computers to calculate payment amounts, according to former IRS Commissioner Charles Rossotti, who served in the role from November 1997 to November 2002. That work involves writing code to access IRS taxpayer files of previously filed returns and making the calculations.

"I don't know how much if any of this work can be done remotely by workers at home," Rossotti said. "My guess is not very much."

Calculations to determine payments are more complex than it might seem because depending on how the statute is ultimately written, payment amounts could vary based on several factors, Rossotti said. That complexity hindered the agency once before when it oversaw a similar tax rebate payment program aimed at countering the effects of a financial crisis. Former National Taxpayer Advocate Nina Olson, who retired in 2019, said in 2008 testimony before a congressional committee that eligibility standards for the payments and computation rules added complexity for the IRS and confused taxpayers.

Olson recently told Law360 that she's confident the agency will meet its obligations for stimulus payments and paid leave credits but that it will likely have to take workers away from other important programs to do it.

"Thus the agency will fall further behind in its IT modernization efforts, among other things," Olson said.

The IRS will also need to face the problem of how to field taxpayer calls with a limited call center workforce. If the payments go into effect as envisioned in the Senate bill, a lot of calls will come into the agency, according to Mark Everson, who served as IRS commissioner from May 2003 to May 2007 and is now vice chairman of Alliantgroup LP.

Everson said his first concern is about the workforce. For one, budget cuts mean the agency's workforce is stretched thin in several areas. The federal government also generally has an older workforce, but that's especially true of the IRS, he said.

Congress should be bold when providing the IRS funding for its work on the stimulus payments, said Chad Hooper, president of the Professional Managers Association and an IRS employee based in Philadelphia.

"I'm worried about how we will be able to rise to that occasion with half our team," Hooper said.

The Senate plan calls for giving the IRS $250 million to support taxpayer services in the extended filing season and to address the cost of executing an earlier pandemic relief bill, the Families First Coronavirus Response Act, according to the summary. Funding that the IRS receives for operations support would go to efforts to modify systems and generate a mailing list of tax filers for Treasury, Koskinen said. The agency would also have to develop a list of low-income nonfilers and recipients of veterans and Social Security benefits who don't file tax returns, to ensure they get money, he said.

However, Koskinen also raised concerns about the extension of the filing and payment deadlines until July 15 delaying completion of a full list of tax filers who are eligible to get cash payments under the Senate's plan.

"They could have extended the deadline for payments, and required everyone to file on time," Koskinen said. "Then they would have had everybody's information on April 15."

--Additional reporting by Alan K. Ota and Stephen Cooper. Editing by Tim Ruel and John Oudens.

For a reprint of this article, please contact reprints@law360.com.