In an email January 13 to all employees of the Internal Revenue Service, under the headline "Budget Update: Tough Choices," IRS Commissioner John Koskinen said the agency's budget for fiscal year 2015 has been slashed by $600 million and the IRS must absorb a cut in spending of $346 million in the remainder of the current fiscal year.
As a result of those cuts, Koskinen said, there will be delays in critical information technology investments of more than $200 million that will "hurt taxpayer service and cost-efficiency efforts; taxpayer protections against identity theft will be delayed; there will be 46,000 fewer individual and business audit closures, and a hiring freeze will result in the loss of some 1,800 enforcement personnel through attrition and 3,000 to 4,000 fulltime employees.
Among the other results, Koskinen said, will be a loss of at least $2 billion in revenue that would have been collected by enforcement personnel; delays in some taxpayer refunds; an increase in correspondence inventories, and diminished taxpayer service via phone and in person.
In her recent year 2014 annual report to Congress, National Taxpayer Advocate Nina E.Olson said the IRS's increasing workload, the erosion of public trust occasioned by the IRS's use of "tea party" and similar terms in screening applicants for tax-exempt status and the sharp reduction in funding have created a "perfect storm" of trouble for tax administration and for taxpayers.
Olson said taxpayers are likely to receive the worst levels of taxpayer service in 2015 since at least 2001 as a result of these factors and the the additional work involved in the implementation of the Affordable Care Act and the Foreign Account Tax Compliance Act. Among the other points in Olson's report to Congress are the following:
- The budget reductions over the last five years have brought about a devastating erosion of taxpayer service, harming taxpayers individually and collectively.
- The lack of effective administrative and congressional oversight, in conjunction with the failure to pass taxpayer rights legislation, has eroded taxpayer protections enacted 16 or more years ago.
- The combined effect of these trends is reshaping U.S. tax administration in ways that are not positive for future tax compliance or for public trust in the fairness of the tax system.
- This downward slide can be addressed if Congress makes an investment in IRS and holds it accountable for how it applies that investment.
Olson's report noted that the IRS typically receives more than 100 million telephone calls, 10 million letters and 5 million visits at its walk-in sites from taxpayers each year. As a result of cuts in its budget, the IRS is unlikely to answer even half the telephone calls it receives, and levels of service may average as low as 43%. Taxpayers are expected to wait on hold for 30 minutes on average and longer at peak times. IRS will answer far fewer tax-law questions than in the past and only "basic" tax-law questions will be answered. After the filing season, the IRS will not answer any tax-law questions at all, leaving about 15 million late filers unable to get answers to their questions by calling or visiting IRS offices. And, lastly, tax return preparation assistance has been eliminated.