Budget cuts at the Internal Revenue Service are taking a toll on the agency’s ability to safeguard against identity theft and close the tax gap, according to the head of the employees union.
“The need for sufficient enforcement staffing is more important than ever,” National Treasury Employees Union President Colleen M. Kelley said in testimony submitted to the House Oversight and Government Reform Subcommittee on Government Organization for a hearing Thursday (see IRS Prodded to Cut Identity Theft and Tax Gap). Kelly was not present to at the hearing to testify, but her testimony was included in the record.
The tax gap is the amount of taxes owed that is not paid on time; it is the most comprehensive measure the IRS has on non-compliance, and it presently is put at $450 billion—a non-compliance rate of some 17 percent, the NTEU leader told the subcommittee. As to identify theft, she said the agency currently has a backlog of more than 228,000 cases.
These serious issues, and others like them, are severely affected by consistent underfunding of the IRS, Kelley noted, emphasizing that for fiscal 2012, IRS funding was reduced by almost $330 million below its fiscal 2010 level.
“In addition to hampering the IRS’s ability to collect revenue and assist taxpayers in a timely manner, the fiscal 2012 funding reductions have resulted in 5,000 fewer staff on the payroll this filing season compared to last year, Kelley said. She added that these reductions have come “at a time when the workload is dramatically increasing—and staffing levels are more than 20 percent below what they were 15 years ago.”
The NTEU leader noted that as Tax Day 2012 approached earlier this week, taxpayers felt the impact of the reduced staffing in the form of delays in their ability to receive telephone help and lengthy waits at Taxpayer Assistance Centers across the country.
The IRS itself said 107 of the 398 TACs nationwide are currently staffed by just one or two employees, while overall staffing at TACs is half of what it was just eight years ago, she told the subcommittee.
Kelley reiterated NTEU’s strong support for the fiscal 2013 IRS budget proposal advanced by the White House. It calls for IRS funding of $12.76 billion, up nearly $945 million from the current fiscal year, with more than $400 million of the increase to go toward enforcement efforts, which play a key role in efforts to close the tax gap as well as combat identity theft.
While it may not be possible to completely close the tax gap, she told the House members, “Even an incremental reduction in the amount of unpaid taxes would provide crucial resources for the federal government.”
Despite the handicap of insufficient resources and strained staffing levels, IRS employees have had success in removing nearly 325,000 fraudulent returns from processing through mid-October 2011 and preventing the issuance of more than $1.3 billion in fraudulent refunds. Further, the agency has issued some 56,000 personal identification numbers to taxpayers who reported being victims of identity theft, thus clearing the way for the processing of their returns.
The White House budget proposal includes $38 billion to help support the agency’s anti-identity theft effort, including increasing the specialized staff needed to handle such cases.
“NTEU believes that only by restoring critical funding for demonstrably effective enforcement and taxpayer service programs will the IRS be able to maximize revenue collection that is critical to reducing the tax gap, and combat identity theft through fraud prevention and victim assistance,” said Kelly.