The Internal Revenue Service’s fiscal year 2015 appropriation of $10.9 billion and staffing levels of 81,279 full-time equivalent employees continue a decline that has occurred over several years and are now below fiscal year 2009 levels, according to a new government report.
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In response to budget cuts, the IRS has taken steps to reduce its staffing costs, including extending a hiring freeze and limiting seasonal employment. According to IRS commissioner John Koskinen, the IRS may also furlough employees for two days later in fiscal year 2015. The IRS is concerned about filing season performance, the GAO noted, and anticipates it may face some challenges processing returns that claim the Premium Tax Credit—an advanceable, refundable tax credit designed to help eligible individuals and families with low or moderate income afford health insurance purchased through the Health Insurance Marketplace.
As a result, the IRS expects that some tax refunds may be delayed. The IRS also projects significant declines in telephone service—only 38 percent of taxpayers who seek help from a live assistor will receive it and wait times will average almost one hour. The IRS cites resource constraints and increased call volume as primary factors contributing to the decline in telephone performance.
The IRS’s fiscal year 2016 budget request is $12.9 billion. This amount is almost $2 billion (18 percent) more than IRS’s fiscal year 2015 appropriation, and $667 million above the discretionary spending cap. About half of the requested increase is for operations support. The largest requested increase for full-time equivalent employees is about 4,000 FTEs for enforcement. The budget request includes $490 million and 2,539 FTEs to implement the Affordable Care Act.
Additional funding is not the only solution to performance declines across the IRS, however, the GAO noted. Although its resources are constrained, the IRS has flexibility in how it allocates resources to ensure that limited resources are utilized as effectively as possible.
This environment of constrained resources also highlights the importance of strategically managing operations to make tough choices about which services to continue providing and which services to cut. The IRS has begun to plan more strategically. For example, in 2014 the agency established the Planning, Programming and Audit Oversight office to improve coordination of resource decision making and long-term strategic planning.
This was, in part, a response to the GAO’s June 2014 recommendation that IRS develop a long-term strategy to address operations amidst an uncertain budget environment. Further, the IRS is developing a six-year initiative to better understand how taxpayers want to interact with the agency. The initiative’s overall goal is to provide taxpayers with secure self-service options and to improve taxpayer service.
The GAO has previously recommended additional actions that the IRS could take to improve operations, plan more strategically, and improve revenue collection, the report noted. These have included recommendations that the IRS develop a long-term strategy to improve web services provided to taxpayers.
As of February 2015, IRS officials reported that the agency does not have a separate online services strategy. Rather, this strategy is a key component of the IRS’s Service on Demand strategy, which aims to deliver service improvements across different taxpayer interactions such as individual account assistance, refunds, identity theft, and billings and payments.
