The Internal Revenue Service will audit about one-third fewer tax returns this year than it did in fiscal 1997, Commissioner Charles O. Rossotti said Thursday.
Because of "stresses on the IRS," the number of audits and collection actions "will drop on the order of 30 to 40 percent over what they were two years ago," Rossotti told a National Press Club audience in Washington. He did not say what the revenue impact would be, and an IRS spokesman said later the agency has no estimate of dollar losses. In May he told a congressional committee that only a tenth of one percent of potential revenue would be lost because of the enforcement dropoff.
He said the IRS payroll has declined by 13,000 employees over the last four years, while the agency is getting little support from its computer systems that "actually date prior to the time that the first astronauts walked on the moon." The remaining employees are experiencing understandable "confusion and anxiety" during a period of wrenching change, he added.
"Together," Rossotti said, "this poses the risk of increased unfairness in administration of the law and, ultimately, undermining our entire system of voluntary compliance."
In his speech, billed as a progress report a year after the IRS Reform and Restructuring Act took effect, Rossotti described himself as hopeful about the agency's future. "Today I am more optimistic about our chances of success than on the day I took office," he said.
But he warned that without full funding of the administration's $8.1 billion budget request for fiscal 2000, tax enforcement and collections may decline even more. The House of Representatives cut $135 million from the budget, including $30 million from enforcement programs. The Senate cut the budget by $57 million. The two houses are conferring over the appropriations bill.
Looking to the longer term, Rossotti said that even though he is optimistic about the agency's future, there is a real danger that Congress and the public will run out of patience before the agency has been revamped. A complete modernization will take another eight to 10 years, he said, but "the next 18 to 24 months are critical" to prove that the modernization program is on the right track.
"If we don't succeed this time," he added, "I'm not sure we'll get another try."