The House Ways and Means Committee released a new report Wednesday on the Internal Revenue Service’s declining level of customer service during the 2015 tax-filing season, blaming the IRS for diverting funds away from taxpayer service to finance other priorities such as implementation of the Affordable Care Act.
The report, from the Republican side of the committee, attempts to counter the IRS’s claim that its lackluster performance was due to budget cuts, citing evidence that the IRS deliberately cut funding for customer service that was under its control.
“These findings are deeply troubling,” said Ways and Means Chairman Paul Ryan, R-Wisc., in a statement. “At all times, but especially during tax season, the IRS should put the taxpayer first. But instead, the agency cut funding for the very customer service that taxpayers rely on. The IRS has a lot to answer for, and the Ways and Means Committee is going to hold it accountable.”
The report describes a number of questionable decisions in detail. For example, the report found that the IRS made a 73 percent reduction in user fees allocated to customer service, and a 6 percent decrease in total funding for taxpayer assistance. On the other hand, the IRS awarded $60 million in bonuses to its employees, at a time when the IRS did not yet know what its budget would be for fiscal year 2015. The amount of time IRS employees spent on union activity would allow for over 2 million additional taxpayer-assistance calls, according to the report.
The report claims that if the IRS contracted with private debt collectors it could increase its own enforcement budget by more than $100 million every year. However, the IRS eliminated the private debt collection program in 2009 because the program failed to live up to its promises (see IRS Nixes Private Debt Collection Contracts).
The report also found that the IRS prioritized Affordable Care Act implementation over other activities, including taxpayer assistance. It noted that although the IRS has made several unsuccessful IT investments, the IRS successfully implemented a comprehensive IT system to implement the ACA.
In addition, the rate of improper payments of the Earned Income Tax Credit has remained consistently high regardless of the IRS’s funding rate, the report noted.
Not only did the IRS spend $2.1 million on litigation services that the government could easily have performed itself, according to the report, but it may have improperly shared confidential taxpayer information.
At the end of fiscal year 2014, the IRS estimated total tax delinquency was 3.12 percent for federal employees, representing over $3.5 billion owed in taxes.
IRS Commissioner John Koskinen testified before the House Ways and Means Oversight Subcommittee on Wednesday in a hearing examining the 2015 tax-filing season and defended the agency’s use of its funds in the face of budget cuts.
“Our low service levels were the result of the budget cuts we have had to absorb,” Koskinen said in his opening statement. “Funding for the agency has been reduced by $1.2 billion over the last five years, dropping to $10.9 billion in fiscal year 2015. The IRS is now at its lowest level of funding since 2008. If adjusted for inflation, the agency’s budget is now comparable to where it was in 1998, except that this year we will process an estimated 27 million more returns than we did 17 years ago.”
Koskinen noted that since 75 percent of the IRS budget is personnel, the agency has been absorbing the budget cuts, mainly by reducing its workforce.
“As a result, we ended FY 2014 with more than 13,000 fewer permanent full-time employees compared with 2010,” he pointed out. “We expect to lose another 3,000 or more through attrition by the end of this fiscal year. This year, the IRS was forced to substantially reduce hiring of extra seasonal help we usually have during the filing season. As a result, our phone level of service at the start of the filing season was 54 percent, and dipped below 40 percent toward the end of filing season. That means many callers were forced to call more than once to get through, and more than six out of every 10 people who called could not reach a live assistor. Further, we expect to end the fiscal year with an average phone level of service of only 40 percent. That is truly an unacceptable level of taxpayer service.”
Ways and Means Oversight Subcommittee Chairman Peter Roskam, R-Ill., said the IRS should not have reduced taxpayer service despite the budget cuts. “The IRS has blamed the decline in customer service on budget cuts,” he said. “But Congress didn’t cut the IRS’s budget for taxpayer assistance from 2014 to 2015. The amount of money Congress appropriated to the IRS for taxpayer assistance was the same this year as last year, but the level of service has decreased drastically. The Commissioner himself has said that taxpayer assistance this year is abysmal.’”
Sen. Chuck Grassley, R-Iowa, a former chairman of the Senate Finance Committee, also criticized the IRS’s level of performance. “No agency will ever have a limitless budget,” Grassley said in a statement. “That’s the reality of being a taxpayer-funded operation. Every agency has to get the most bang for the buck. The IRS’ complaints about not having enough money to do its job fall flat when you look at the evidence of spending on other priorities.”
Rep. John Lewis, D-Ga., the ranking Democrat on the subcommittee, blamed Republican lawmakers for punishing the IRS over the Tea Party targeting scandal. “It is time to put political agendas aside and work together to provide this agency with the resources it needs to improve taxpayer service and collect revenue,” he said. “I ask my colleagues on the other side of the aisle to join me in this effort.”
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