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The IRS is Running on Fumes… IRS Chief Doubles Down on Tech


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6/10/2018
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The IRS is Still Running on Fumes… IRS Chief Wants to Double Down on Technology Rather than “Throwing Money at Enforcement…”

IRS resources have been depleted $533 million and its staff has dropped 14 percent (with a loss of 22,000 full-time employees) since 2012 according to the Internal Revenue Data Book.  Odds of an audit have dropped by about 50% from previous levels.  New investigations of delinquent taxpayers have fallen by 85%.  Enforcement actions like liens, levies and seizures have fallen by about 75% from 4-million actions per year in 2012 to only 1-million actions per year in 2017.  Infrastructure IT and phone operations are trending significantly down.

A new appropriations bill included in the House Appropriations Committee’s 2019 Financial Services and General Government Appropriations Bill, would infuse $11.6 bn into the IRS, a $186 million increase.  The bill provides IRS Taxpayer Services an additional $31 million for the agency’s flagging customer service function (answering phones and written correspondence).  For a full 10 years, the IRS budget has been slashed every year.

The National Treasury Employees Union president Tony Reardon testified before the Senate Appropriations Subcommittee on Financial Service and General Government.  He said, “The lack of sufficient staffing has strained IRS’ capacity to meet its stated mission of providing America's taxpayers top quality service by helping them understand and meet their tax responsibilities, and to enforce the law with integrity and fairness to all.”  This may be news to some among the general public, but to tax practitioners across the nation who interact with the IRS on a daily basis this comes as no surprise.  “Without sufficient staffing to effectively enforce the law to ensure compliance with tax responsibilities and combat fraud, our voluntary tax compliance system is at risk,” Reardon wrote.  He also said, “because of cuts in service, the agency has seen "a drastic reduction in the number of Customer Service Representatives (CSRs) from 21,057 in 2010 to 9,209 in 2017, a 56 percent drop," while the number of individual taxpayers increased by 10 million.

You can listen to some of the subcommittee testimony on CSPAN here - https://www.c-span.org/video/?445767-1/treasury-secretary-steven-mnuchin-testifies-2019-budget.

Interestingly, the proposed spending bill doesn’t immediately budget to increase IRS staffing – it cuts another 2,200 jobs! – and instead focuses on IT and technology directives.  Acting Internal Revenue Service chief David Kautter defended the Trump administration’s $11.1 billion fiscal 2019 budget request for its projected savings of $24.5 million and cuts of more than 2,200 full-time equivalent jobs.  Treasury Secretary Steven Mnunchin and IRS chief Davit Kautter were insistent that technology is the way: “We have spent a lot of money on technology at IRS, but have not spent enough,” Mnuchin said, promising a five-year plan “to bring IRS into the modern age of technology” later this summer.  The Trump Treasury/IRS leaders did not want to focus on beefing up enforcement personnel or on regulation and oversight, but instead wanted to prevent hiccoughs like the IRS website going down on Tax Day and wanted to invest in digital assets and modern technology that would make compliance and automated detection of non-compliance easier, automating most functions.  They advocated for a “culture change” to do more than simply “throwing money at enforcement.”  In typical Wall Street fashion, they found the government use of legacy software to be embarrassing and had a “tools” and “processes” mindset as the best approach to the complicated enforcement problem.  Some of the systems currently in use are vintage 1960 legacy systems that are still being used.  They even called the outmoded IRS software their “Achilles Heel.”  Defending against cyber attacks against the IRS, which are rampant, was also a big topic of conversation.

There was one interesting exchange during the subcommittee hearing that highlighted the problem with a reduced IRS budget, which leaves taxpayers who are confused by an incomprehensible and ever-changing tax code out in the cold.  The ranking Democrat on the panel, Delaware Sen. Chris Coons, asked Kautter if the level of service for the phone line would "continue to be 80 percent this coming filing season," to which Kautter said, "under the budget that’s been submitted, it would be less than 80 percent… probably be in the 60 — 60, 65 percent range."

Coons replied, "So about 40 percent of Americans who call looking for assistance, given a sweeping tax code reform — the biggest in 30 years — about 40 percent wouldn’t get an answer?"

https://www.cbpp.org/blog/house-bill-leaves-irs-enforcement-depleted

https://www.cnbc.com/2018/05/11/budget-cuts-shrink-the-irs-and-corporations-are-the-big-winners.html

http://thehill.com/policy/finance/388994-house-appropriations-committee-offers-bill-that-would-boost-irs-funding

https://taxcontroversy.foxrothschild.com/2018/05/irs-receive-slight-funding-boost-house-appropriations-bill-released-today/

https://www.govexec.com/management/2018/05/irs-defends-budget-would-cut-more-2200-full-time-jobs/148415/

https://www.c-span.org/video/?445767-1/treasury-secretary-steven-mnuchin-testifies-2019-budget

https://www.appropriations.senate.gov/imo/media/doc/052218%20-%20IRS%20Kautter%20Testimony.pdf



Category: Tax Law


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