The union representing Internal Revenue Service employees is warning that budget cuts will hamper IRS efforts to combat identity theft and assist taxpayers.
A recent survey by the National Treasury Employees Union found IRS members warning that tax refunds for identity theft victims could be delayed by six months to a year because of budget cuts. The agency currently has nearly 650,000 active identity fraud cases; and the Treasury Inspector General for Tax Administration has warned of billions in fraudulent refunds over the next five years unless identity theft is adequately addressed.
Honest taxpayers are affected in another important way by budget cuts, the NTEU cautioned. Reduced enforcement efforts caused by inadequate staffing tend to encourage scofflaws, shifting a costly burden to those who meet their tax obligation. IRS and Census Bureau data indicate that in 2006, the average U.S. household effectively paid an extra $3,300 to subsidize noncompliance by others. The gap between taxes owed and taxes paid currently is estimated to be approximately $400 billion annually.
“The tax-avoidance citizens are going to get away with cheating the government due to lack of resources,” a respondent to the NTEU survey said.
“When you look closely, as our members do every day you see clearly how inadequate funding of the IRS seriously impacts the public, as well as small and large businesses, and our nation as a whole,” said NTEU president Colleen M. Kelley in a statement.
The IRS has had its budget cut for the past two fiscal years and is planning to furlough employees after tax season as a result of the budget sequester (see IRS Employees May Face 5- to 7-Day Furloughs from Sequester).
With significantly less staff—even before the cuts mandated by sequestration and the resulting potential for unpaid employee furloughs—the IRS has needed to cut back on free tax return preparation, especially at its walk-in Taxpayer Assistance Centers. These cutbacks harm senior citizens and low-income taxpayers who often do not use or have computers, in addition to those seeking help with a specific question or trying to navigate the Tax Code, the NTEU noted.
Last year, for example, the IRS said 107 out of 389 TACs across the country were staffed by just one or two employees, while overall TAC staffing was half the level of eight years ago. This filing season, long lines beginning in the pre-dawn hours well before the offices open and lengthy waits for help are common at TACs everywhere, the NTEU noted.
The survey also found that those seeking assistance encounter long wait times on the telephone. In fiscal 2012, the agency was able to handle only 68 percent of calls seeking help, with callers having to wait an average of 17 minutes on hold. In contrast, in 2004, the IRS was able to answer 87 percent of its calls, with an average wait time of 2 ½ minutes. This filing season, Mondays and Tuesdays tend to be the busiest days, and afternoons often are a little easier getting through. Taxpayers should note, too, that employees answering the phones are not responsible for long wait times, the NTEU emphasized.
The budget cuts are seriously affecting the agency’s ability to conduct taxpayer education and outreach, a particularly important activity for small business owners. The NTEU noted that there simply is not enough IRS staff to handle all the hardship cases seeking help, leading to long delays for those citizens. In addition, there is not enough personnel available to provide sufficient foreign language assistance—a serious problem for non-English speakers, compounded by the increasingly complex Tax Code.
Taxpayers who owe money after audits are seeing higher penalty and interest charges than if their cases were able to be handled on a more timely basis, the NTEU noted.
Those filing an amended return and seeking a refund are finding the processing time extended by a month, from 12 weeks to 16 weeks.
Frontline IRS employees are also feeling frustration from the lack of resources. “We are doing as best we can with a staff of 14 that used to be a staff of 32,” one said in a survey comment.
The U.S. is ill-served by inadequate IRS funding, according to Kelley. “The fact is that every single American pays a price when we fail to invest in the IRS,” she said, noting that the agency collects 93 percent of all government revenue. “Without an effective revenue collection agency, there is not enough money to fully fund other government agencies, and that impacts such critical federal services as border security, food safety and national defense.”