Files Misplaced in Computer : 600,000 Refunds Remain Unpaid, Head of IRS Says

As many as 600,000 Americans have not yet received tax refunds because the Internal Revenue Service has been unable to find their files in its new computer system, the head of the IRS told a House subcommittee Friday.

Those taxpayers should file duplicate returns while the IRS continues to search its computers, Commissioner Roscoe L. Egger Jr. said at the hearing. He said that all refunds would be paid “eventually”--perhaps by the end of July.

The IRS has had problems this year with $103-million worth of new computer equipment intended to modernize its record-keeping. At one point last month, more than 1.1 million refunds reportedly were still unpaid.

But Egger said Friday that most of the computer problems have been cured. And he denied charges by Rep. J. J. Pickle (D-Tex.), chairman of the House Ways and Means oversight subcommittee, that the tax returns are “lost.”

“They’re not lost, Mr. Chairman,” Egger told Pickle. “They’re in the file somewhere.”

50,000 Appeals Shredded

Last month, computer problems contributed to the shredding of more than 50,000 unanswered appeals from taxpayers at the IRS processing center in Fresno, Egger said. Pickle said that members of the subcommittee would inspect the Fresno operation with IRS officials next week.

Egger predicted that the congressmen will like what they see, saying that increased overtime by employees and $33 million in supplemental funds from Congress have helped the IRS erase its backlogs.

Special phone numbers have been set up so taxpayers can call the IRS for information, and Egger said that duplicate returns are being speeded through processing. “It gets special treatment, believe me,” he said.

Between 500,000 and 600,000 taxpayers still have not received refunds, he acknowledged. IRS officials estimate that the average refund will be $833.

By law, the IRS must pay 13% interest, compounded daily, on refunds not made before June 1. But Egger noted that, as of June 13, the IRS had paid almost $6 million in interest, compared to $6.8 million last year. Egger said he could not determine whether total refunds would be higher than last year.

‘A Little Double Talk’

However, Pickle charged that Egger was giving the subcommittee “a little double talk.”

“It doesn’t add up,” he said, asking how IRS expenses for refunds could go down when interest rates and the number of Americans qualifying for refunds both were up.

Also, Pickle criticized the IRS for failing to respond when taxpayers became frustrated by this year’s delays. “Undermining the public’s faith in the ability of the IRS to properly administer the tax code is a prescription for absolute disaster,” he said, reading from a statement.

“Yours is a hard agency to love, even by those of us who are required here by our duties to do so,” Pickle said.

‘National Disgrace’

Rep. Peter H. Kostmayer (D-Pa.), whose district was hit hard by IRS delays at the Philadelphia processing center, called the treatment of taxpayers “a national disgrace.”

Kostmayer complained that, despite IRS statistics, taxpayers must “wait and wait and wait” for checks that never arrive. He said that the public’s willingness to pay taxes is dependent on the government’s ability to inspire trust in the system.

“There are unfortunate stories behind the statistics,” Kostmayer said in written testimony. He told of one Pennsylvania woman who “had to postpone a much-needed cataract operation because the black hole swallowed up her refund.”