Internal Revenue Service Acting Commissioner Steven T. Miller told a congressional panel Thursday that while tax season began with delays caused by the late passage of the fiscal cliff legislation, the rest of the season eventually went smoothly.
“The 2013 filing season started with difficult challenges for the IRS,” Miller said in testimony before the House Ways and Means Oversight Subcommittee. “As the subcommittee is aware, substantial tax law changes were enacted on January 2 of this year, just before the IRS would normally begin accepting e-filed returns. IRS staff worked nonstop, around the clock, to make changes to systems and forms necessary to open the tax filing season.
“I am pleased to say that, as a result of exceptional planning and hard work by our employees, all but a discrete minority of taxpayers were able to begin filing in late January, and all were able to file by early March,” Miller added. “Despite the challenges we faced at the outset, the filing season ran smoothly. Refunds went out quickly to taxpayers, and our strengthened refund fraud detection tools have been working well. As for customer service, accuracy rates for both customer tax law and accounts questions remain in the 90-plus percentile.”
Tax Preparer Regulation
Miller also discussed the status of the IRS’s efforts to regulate the tax preparer profession. “The IRS continued implementation of its Return Preparer Program, begun in fiscal year 2011,” he said. “The foundation of this program is mandatory registration for all paid tax return preparers. Through September 2012, more than 860,000 preparers have requested Preparer Tax Identification Numbers (PTINs) using the online registration system.”
However, he acknowledged that earlier this year a federal court stopped the IRS from enforcing the competency testing and continuing education requirements for registered return preparers (see Court Rules IRS Doesn’t Have the Authority to Regulate Tax Preparers).
“The injunction does not apply to the requirement to obtain a PTIN, so that portion of the program continues,” Miller pointed out. “But at this time we are not permitted to move forward with testing or continuing education requirements. We remain confident in our legal authority and remain committed to protecting taxpayers through implementing reasonable standards in this area. The original district court opinion is under appeal.”
Identity Theft and Tax Fraud
Miller also reported that the IRS’s efforts to address identity theft and tax refund fraud are expanding and touch nearly every part of the IRS. “We are working hard to prevent fraud, investigate identity theft-related crimes and help taxpayers who have been victimized by identity thieves,” he said. “Over 3,000 IRS employees are currently working on identity theft—more than double the number at the start of last filing season. We have also trained 37,000 employees who work with taxpayers to recognize identity theft and help victims. Since the beginning of 2013, the IRS has worked with taxpayers victimized by identity theft to resolve and close more than 200,000 cases. To help past identity theft victims avoid delays in filing future returns and receiving refunds, we expanded the issuance of Identity Protection Personal Identification Numbers to more than 770,000 past victims this year, more than twice as many as last year.”
Last fiscal year, the IRS significantly expanded its fraud detection efforts, spending nearly $330 million combating refund fraud, including identity theft, Miller noted. During fiscal 2012, the IRS protected more than $20 billion of revenue related to fraudulent returns, including identity theft, up from $14 billion in the prior year. IRS efforts stopped 5 million suspicious returns in 2012, up from 3 million stopped in 2011, according to Miller.
Health Care Reform and Tax Code Complexity
Ways and Means Oversight Subcommittee chairman Charles Boustany Jr., M.D., R-La., raised the problem of the growing complexity of the Tax Code.
“There have been nearly 5,000 changes to the Tax Code in the past 10 years,” he pointed out. “As a result of the growing length and complexity of the Tax Code, individual taxpayers and businesses spend an estimated 6.1 billion hours and $163 billion every single year simply complying with tax-filing requirements. These burdens aren’t the taxpayers’ alone. The IRS is tasked with processing the nation’s tax returns and administering our broken Tax Code. At the same time, the IRS must deliver expert customer service to the millions of honest taxpayers who turn to it for assistance. But more, the agency has to execute its core mission while managing increasing responsibilities to run social policy programs such as ObamaCare.”
Boustany acknowledged that despite all of this, the IRS managed to wrap up the 2013 filing season with efficiency and few delays. “Although the 2013 filing season was delayed due to preparations for tax law changes, the IRS processed over 93 million individual tax returns and issued $214.5 billion in refunds to over 77.8 million taxpayers,” he said.
The panel also discussed the Obama administration’s budget request for the IRS of nearly $13 billion for fiscal year 2014, an increase of more than a billion dollars over the 2012 enacted rate. Included is a request for 6,287 additional employees, Boustany noted.
“This significant demand for new personnel arises in part from the fact that the IRS has been given two competing responsibilities: revenue collector and social program administrator,” he said. “The biggest contributor to this problem is the President’s health care law. The administration’s FY 2014 budget request acknowledges this—more than 803 employees have already been sucked out of the agency’s enforcement, operations, and customer services accounts to implement ObamaCare. This budget seeks 1,151 more, for a total of 1,954. Even as the IRS has made progress with taxpayer ID theft and improper payments, it has acknowledged it can do more; the truth is that ObamaCare is pulling the IRS away from its core mission.”
Oversight Subcommittee ranking member John Lewis, D-Ga., defended the Affordable Care Act’s tax provisions.
“This is a key year for the agency and the Affordable Care Act,” he said. “This is the year the health care reform law is being put into operation. The IRS will play an important role as it helps to deliver hundreds of billions of dollars in premium tax credits to American families next year.”
Lewis noted that the health care reform law has already helped millions of American families and children, including protecting over 17 million children with pre-existing conditions and nearly 7 million young adults who now have health insurance until age 26. The law has also helped more than 4 million senior citizens receive free annual wellness visits under Medicare.
Telephone Assistance Wait
A new report from the Government Accountability Office backed up the contention that tax season ran relatively smoothly despite the late start. While the number of tax returns received and refunds issued was lower in the beginning of the filing season than last year, by the end of March these gaps had closed considerably, according to the GAO.
Overall, the percentage of callers who sought and received live assistance from a telephone assistor at the IRS has been comparable to last year, but lower than in 2010 and 2011, the GAO found. However, taxpayers waited less time to speak with an assistor, which IRS officials attributed to quicker call handling.
The IRS received more calls about identity theft than last year, but access to speak with an IRS assistor who specializes in identity theft has been higher, according to the GAO. Taxpayers currently are waiting over seven minutes to speak with these assistors.