Tax professionals feel the pain.
People don’t often have much nice to say about the Internal Revenue Service. But everybody seems to like what internal revenues pay for—the powerful military, the court system, the interstate highways, air travel safety, the control of disease, the prevention of pollution, national parks, health benefits for elected officials, and so much more.
Without taxes, we don’t have a great country. We don’t even have civilization. And without the IRS, we don’t have taxes.
Despite the crucial importance of the IRS, Congress has reduced the service’s budget to the point where lost revenues may exceed (if they aren’t already) cost savings. And the problem can only get worse, professionals say, with a 14-percent budget cut next year, as reportedly planned by the White House.
The Taxpayer Advocate Service, an independent agency embedded in the IRS, calls Congress “penny-wise but pound-foolish” and says that the IRS needs increased funding, but that such funding should be tied to better congressional oversight.
“Simply put, the IRS cannot function well in the 21st century with the budget it has today,” the TAS’s recent Report to Congress states. “More funding is paramount—for taxpayer service, for compliance function, for the agency’s enforcement function, for technology, and for its ‘support’ operations like security and real estate.”
Nina E. Olson, the National Taxpayer Advocate who heads the TAS, feels the IRS’s pain. The service has to process some 150 million individual tax returns and ten million business returns, then issue 115 million refunds totaling $345 billion. It has to guard against an estimated $22-$24 billion in identify theft and refund fraud. It has to deal with a constant onslaught of legislative changes, an average of more than one a day. And then along comes the Affordable Care Act and the Foreign Account Tax Compliance Act. And now it’s Adios to the ACA and Hola to whatever the Republicans come up with.
Unfortunately, given its current budget, which is 19 percent lower than it was in 2010, the IRS has to dedicate most of its resources to managing the big-ticket missions: the filing season, grappling with new legislation, and keeping up with cybersecurity. That leaves little funds for phone calls from taxpayers, education, outreach, Taxpayer Assistance Centers, compliance personnel, and the Appeals process.
Look at the phone call situation: From 2004 to 2016, the number of calls the IRS received rose from 71 million to 104 million per year, yet the number of calls answered by agents dropped from 36 million to 26 million.
You probably suspected as much. If you called in 2004, you had to wait an average of 2.5 minutes. If you called in 2016, you waited nearly 18 minutes.
The decrease in agent response is partially due to an attempt at increased automation, that is, a computer trying to deal with taxpayer inquiries. But it’s hard to know which is more exasperating—a computer that, deep in its digital heart, couldn’t care less, or watching 18 minutes of your day go down the internal revenue drain. In either case, the penny-wisdom of automation results in the pound-foolishness of taxpayer’s suffering a reduced urge to calculate and honestly report their income accurately.
At the same time, the IRS has had to close many of its Taxpayer Assistance Centers. Since 2011, the number has dropped from 401 to 376, 22 of which have (WTF?) no staff, and 95 of which have a staff of just one.
Furthermore, the IRS has stopped calling these TACs “walk-in” centers because now you need to make a reservation. Which is understandable, given that the centers don’t have enough staff to take care of all the taxpayers with problems.
The TAS Report to Congress also points out that proposed changes to the Appeals procedures will increase costs to both the IRS and taxpayers. The changes would shift issue resolution to litigation venues or IRS compliance functions, in either case requiring unnecessary rework.
The insufficient budget also seems to be resulting in questionable claims. In 2016, the service sent 7,100 letters to taxpayers whose Earned Income Tax Credits had been flagged as questionable. But due to lack of funds, the taxpayers were never audited.
The TAS is calling on Congress to look into the IRS to see where it may be failing to serve taxpayers (rather than itself) well. In that the NTA publishes over a thousand pages per year identifying problem areas, Congress has quite a bit of work to do to earn those health benefits.
Courtesy : CPATRENDLINES