IRS Budget Would Rise Slightly As Agency Manages New Tax Law

Funding for the Internal Revenue Service—which for nearly a decade has been cut or kept flat—would get a small boost under the White House fiscal 2020 budget released on Monday.

The tax agency’s share of the Treasury Department request would be $11.5 billion, compared with $11.3 billion this year “to ensure that IRS can fulfill its core tax filing season responsibilities, continue critical [information technology] modernization efforts, and pro­vide acceptable levels of taxpayer service,” the document said.

Investments in the enforcement budget, the proposal said, totaling $15 billion over multiple years, would generate some $33 billion in new revenue over a decade. The Trump administration also proposed $290 million for multi-year IT improvements to modernize the agency’s notoriously outdated computer systems.

Management changes called for in the budget include “improving over­sight of paid tax preparers; giving IRS the authority to correct more errors on tax returns before refunds are issued; and requiring a valid Social Security number for work in order to claim certain tax credits.”

Treasury Secretary Steven Mnuchin said in a statement that the budget will help implement the 2017 Tax Cuts and Jobs Act and “reflects Treasury’s commitment to greatly modernize the IRS’s IT infrastructure to advance cybersecurity, safeguard taxpayer data, and improve taxpayer experience. The integrity of the voluntary tax compliance system depends on it.”

The National Treasury Employees Union, which represents thousands of IRS employees, was less enthusiastic. “A slight $200 million increase in the Internal Revenue Service budget does little to make up for $845 million in lost funding over the last 10 years,” NTEU National President Tony Reardon said.

In a related development, the Senate Finance Committee on Tuesday released its latest quarterly report on the IRS’s use of private debt collection contractors to go after the most stubborn tax delinquents, a program required by Congress but which critics fear is cruel to struggling low-income taxpayers.

The report showed that the program for fiscal 2018 brought in $51 million in revenue after costs. In less than the first three months of fiscal 2019, it brought in $30 million after cost, committee Chairman Chuck Grassley, R-Iowa, noted. The program’s net revenue, he added, is $53 million, and the total amount provided to the IRS is more than $23.6 million. “Those funds are now beginning to be used to hire and train additional IRS compliance personnel who will be available to help increase the agency’s efficiency and responsiveness to American taxpayers,” Grassley said. “Letting those who shirk their tax responsibilities off the hook isn’t fair to law-abiding taxpayers who do pay their taxes.”

The Partnership for Tax Compliance, a nonprofit coalition of the four contracted debt collectors, hailed the results. “To date, tens of thousands of taxpayers have now fully resolved their tax debts via the PDC Program, and more than 27,000 installment agreements are currently in process providing taxpayers the opportunity to pay their tax debt over time via flexible monthly payments tailored to their budget,” it said in a statement. “Over the past two fiscal years, participating taxpayers consistently give the PDC program an A grade when surveyed by a third party vendor about their experience with the program,” spokeswoman Kristin Walter said.

Struggles with the new tax law and the impact of the recent 35-day partial government shutdown worry professional tax return preparers. A survey of 924 members of the National Association of Enrolled Agents taken in mid-February found that 69 percent were “concerned” about how the new law would be rolled out for the filing season now underway. “While the Department of Treasury and IRS did much to address taxpayer concerns going into the filing season, including recalling over half of the IRS workforce during the shutdown, there were still problems affecting filing, refunds and extensions,” a summary noted. “Centralized Authorization File and Practitioner Priority Service personnel had not been recalled to work and the fax lines at IRS remained offline.”