Taxing Turnaround

Hours after a ceremonial swearing-in before hundreds of his employees in early January, new Internal Revenue Commissioner John Koskinen named the tax agency’s tightened budget as “the most intractable problem” he faces, also expressing hope the hard work staff have spent redacting and submitting documents to Congress as part of an ongoing investigation is nearly complete.

Koskinen, a private sector turnaround specialist and alumnus of the Clinton administration Office of Management and Budget, laid out his top five priorities and praised the “experience and professionalism” of IRS employees during a sit-down with reporters in his office suite.

Having been officially sworn in on Dec. 23, 2013, Koskinen had been visiting IRS offices to meet about half of the agency’s nearly 100,000 employees. He praised his predecessor, acting IRS chief Danny Werfel, for his “outstanding job staying focused on the agency’s core agenda” while handling the problems that surfaced in May 2013 in the controversy over the singling out of primarily conservative groups applying for tax-exempt status.

In response to congressional demands, the IRS has turned over half a million redacted pages of documents from its Exempt Organizations unit of the Tax Exempt and Government Entities Division and has 150 staffers working full time on the response, Koskinen said. “A big chunk of those are lawyers who joined because they’re interested in tax law, but instead are doing discovery. But it is important to provide Congress the information they need and respond as quickly as we can,” he added. “It’s important for all investigations to be completed and in everyone’s interest to get it done. The Senate Finance Committee should finish soon, but the House [investigation] is ongoing and there are follow-up questions,” he said. 

The IRS’ key challenges, Koskinen said, are the upcoming filing season—which as the “new kid” he plans to handle by staying out of the way—followed by “restoring trust” in the wake of the political controversies at the Exempt Organizations unit. Other top priorities are improving tax compliance, particularly refund fraud due to identity theft, and international compliance. Another big challenge facing the IRS is improving taxpayer service, which includes implementing the 2010 Affordable Care Act.

The agency also is working on addressing the poor morale of its employees after years of pay freezes and last fall’s government shutdown. “We won’t turn that around overnight,” said Koskinen, “but we will do enough to assure our employees have the leadership, systems and training they need to succeed.”

Koskinen said he wants to leave one legacy, “putting the agency funding on a solid basis.” He noted that the current budget of $11.2 billion has left IRS’ enforcement operations with 11,000 fewer employees than in 2010. “This is no way to run a railroad,” he said, though he conceded that he has no magic answer to how OMB and congressional appropriators might deliver all or part of President Obama’s requested 2014 budget of $12.9 billion by cutting spending elsewhere.

Budget cuts affect both enforcement capabilities and the agency’s ability to make it easy for taxpayers to make the payments they owe, Koskinen said. “They’re intertwined.”

Though some Republican lawmakers remain critical of the IRS, with some even calling for its elimination, the agency
is not in need of great restructuring, according to Koskinen. “There are management challenges, but the procedures and process are appropriate for getting the work done. Employees are not the problem” as long as the system, resources and leadership are provided and there is free flow of information, he said.

He promised to rebuild the IRS using the same transparency he has relied on in all his previous government and private sector jobs. “My rule in life is to listen to everyone,” Koskinen said. “It took a little while to dig this hole, and it will take a while to dig out of it.”