Identity Theft
Shulman also discussed the agency’s efforts at combating identity theft. “I would simply like to reiterate that the IRS is intently focused on executing a two-pronged identity theft strategy that focuses on both fraud prevention and victim assistance,” he said. “We continue to improve our programs to prevent and detect identity theft and although we cannot stop all identity theft, we are working hard to resolve issues created when identity theft occurs. And in calendar year 2011, the IRS protected $1.4 billion in refunds from being erroneously sent to identity thieves. Finally, working closely with the Justice Department, IRS criminal investigators are pursuing those who are behind these schemes. In January, the IRS and Justice Department announced a nationwide sweep that targeted 105 people in 23 states, and our efforts in this area continue.”

New filters installed in the IRS’s systems to combat tax refund fraud and identity theft have been blamed for the refund delays.

New Technology
Shulman noted that this was the first tax season when a more automated tax processing system would be in place.

“In January 2012, the IRS for the first time since the beginning of automated processing of tax returns five decades ago began processing tax returns daily instead of weekly,” he said. “The new system, known as CADE 2, is a major milestone for the tax system and the IRS. CADE 2 addresses myriad issues that have historically created issues in the tax system.”

He said the new system would provide more up-to-date information to customer account representatives, speed account issue resolution, allow for faster refunds, and provide a platform for more real-time analytics and compliance. “It will also eliminate structural technology problems that could lead to time-lag problems, such as when notices are sent to taxpayers,” he added.

Budget Cuts
Shulman discussed the agency's budget cuts in his testimony. “Over the last several years, the IRS budget requests have reflected strategic investments in the IRS that serve to reduce the deficit, along with substantial efficiency and other targeted reductions that reflect our commitment to effective stewardship of the resources that we are given,” he said. “These savings and efficiencies reflect an across-the-board commitment to finding better and more efficient ways to administer the tax system. They come from a variety of sources, including reductions in outside contracts, training and all but case-related travel.  However, even with these efficiencies, the IRS would not have been able to meet the level of budget reduction enacted for FY 2012 without substantially reducing our headcount.”

He noted that the IRS had already instituted an agency-wide hiring freeze and has only been replacing attrition on an exception basis. Attrition savings were not sufficient to meet the 2012 levels, however, so the IRS resorted to voluntary incentives designed to accelerate retirements of those who were retirement-eligible, or close to eligible.

As of March 5, 2012, buyout incentives were given to approximately 1,000 workers, Shulman noted. “As a result of these measures, the IRS has approximately 5,000 fewer staff on the payroll this filing season, as compared to last year,” he said. “Of the 5,000 person reduction, approximately 3,000 are in Enforcement, with the balance of the reduction principally coming from Taxpayer Service.”

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