How Budget Cuts Affect Taxpayers
The 2014 Omnibus Appropriation Bill–the piece of legislation that is responsible for allocating funding for the entirety of the federal government—was recently finalized and released. With the economy still recovering, it came as no surprise that the bill announced budget cut after budget cut for a variety of departments. Slightly bewildering, though, was the large cut to the Internal Revenue Service, whose funding is now sitting at levels that mirror 2009.
The IRS budget for the fiscal year 2014 is $11.3 billion, a shockingly large amount of money for those not familiar with federal congressional and departmental budgets. For those in the IRS, though, the $11.3 billion is $526 million dollars less than was received last year. And, having asked for $13 billion—requested from Congress by Obama himself—the IRS is saying that the cut is crippling. The national taxpayer advocate, Nina E. Olson, stated in her annual report released to Congress that the IRS has been “chronically underfunded” for years.
The severe cut is bound to have consequences, says Olson and others. The IRS has already been struggling with assisting taxpayers, fielding calls, and solving problems. Having already cut staffing by 8% despite the increase in work, the IRS is predicting delays and backups for the 2014 tax season.
The agency recently announced that due to the cuts and decline in staff members, the IRS would not be answering any calls post the April tax deadline—even for those taxpayers that have received an extension on their taxes. The announcement was foreseeable—in 2013, the agency struggled with phone calls, only able to answer 61% of calls from people who needed to speak to a customer service representative, with those people who did get through spending an average of 18 minutes waiting on the phone before being connected. This is a significant decrease compared to the 87% of calls answered ten years ago.
The National Treasury Employees’ Union President, Colleen M. Kelley, predicts that the biggest impact to taxpayers will be in refund delays and the inability for the IRS to assist taxpayers with questions. The legislation also includes specific language for improving taxpayer services, addressing and removing fraud, and working to combat identity theft, yet there is no additional funding allocated for these provisions. As such, it’s assumed that these problems may worsen, or at the very least not be improved upon.
For the average taxpayer, the opinion about impact is mixed: some sources say taxpayers should expect delays, while others say there may simply be fewer audits. It should be noted that the IRS has already delayed the opening of tax season by two weeks as a result of the October 2013 government shutdown. The budget blow certainly hasn’t alleviated the need for more time to test the tax programing system following the 16-day closure.
For tax questions or problems this year, a taxpayer is probably better off investing in a tax service or hiring an accountant. Getting through to the IRS is going to be a headache. Best tip for taxpayers in 2014: stay calm, have patience, and expect that any tax refunds will be (only temporarily) held up.