Budget and Personnel Cuts Have Hurt the IRS

Budget cuts and staff reductions at the Internal Revenue Service over the past four years have hurt the agency’s ability to enforce tax laws and serve the public, according to a new report.

“Performance in enforcement and taxpayer service has decreased or fluctuated” in part because the agency has been forced to absorb $900 million in budget cuts since fiscal 2010 by reducing, delaying or eliminating services, including “substantially” reducing employee training, the Government Accountability Office concluded.

Since fiscal 2009, the agency has reduced its workforce by about 9 percent, or 8,000 full-time employees; its current $11.3 billion budget is slightly below the fiscal 2009 appropriation of $11.5 billion. Average wait times for customers have generally increased since fiscal 2009, while tax return examination and coverage measures have declined over that time period, GAO found. The IRS also has a backlog of sorts: overage correspondence, or paperwork the agency has not responded to within 45 days of receipt, has risen significantly since 2009. Still, the agency was providing better live telephone service in March 2014 than in March 2013 because of lower demand, which the IRS attributed to fewer changes in tax laws for this filing season.

To deal with the millions in budget cuts over the past four years, the IRS has delayed two major information technology projects and reduced employee training costs by 83 percent and training-related travel costs by 87 percent. “In its fiscal 2013 report to Congress, the National Taxpayer Advocate lists training cuts as one of the IRS’ most serious problems,” GAO said. From fiscal 2009 to fiscal 2013, the per-employee spending fell from $1,450 per full-time staffer to less than $250.

For example, training was reduced by 96 percent from fiscal 2009 to fiscal 2013 for the agency’s Tax Exempt and Government Entities Division, currently under investigation for allegedly targeting certain political groups applying for nonprofit tax status.

National Treasury Employees Union President Colleen Kelley said the union “has testified repeatedly that IRS needs additional funding to ensure our voluntary tax compliance system operates efficiently and that work must be done by trained, accountable IRS employees.” NTEU represents many IRS employees. “We cannot allow the service and operations at this important agency to be degraded by lack of appropriate funding,” Kelley said. “IRS employees are committed to the work they do and need the support of Congress to carry it out.”

President Obama has proposed $12.5 billion for IRS in fiscal 2015, a 10.5 percent increase over fiscal 2014. Of that total, the largest request -- $658 million -- is for operations support which includes the agency’s information systems and overall planning. The White House budget also proposed adding close to 7,000 more full-time employees across the agency in fiscal 2015 -- 3,000 more workers for enforcement alone.

The IRS currently has roughly 84,000 full-time employees, down nearly 10,000 people since fiscal 2010. The agency’s workload has increased at the same time it has lost personnel; in addition to collecting and enforcing taxes, the IRS plays important roles in the prevention and detection of identity theft and in the continued implementation of the 2010 Affordable Care Act.

Boosting the IRS budget isn’t the only way the agency can more effectively manage its operations, GAO said. For instance, the watchdog recommended developing a long-term strategy to strengthen online services. The IRS said it has been working on such a plan that will be completed by February 2015.