The Internal Revenue Service generally took reasonable steps to plan for the required sequestration spending cuts in its fiscal year 2013 budget, although it needed to cut back on staffing for taxpayer service, collections and enforcement activity, according to a new government report.

The report, from the Treasury Inspector General for Tax Administration, noted that the IRS was required to submit an operating plan within 30 days of enactment of the annual appropriations legislation. TIGTA’s analysis determined that the IRS achieved the overall savings it planned in each of its operating appropriations. However, because the savings achieved by cost area varied widely from the budgeted amounts, the IRS needed to significantly revise its post-sequestration budget. 

As part of this revision, funds from cost areas with greater than planned savings were reallocated to other cost areas. The IRS also reduced its planned furlough days from seven to three days.

In addition, implementation of the mandated sequestration cuts, coupled with a trend of lower budgets, reduced staffing, and the loss of supplementary funding for the implementation of the Affordable Care Act, collectively affected the IRS’s ability to effectively deliver its priority program areas, including customer service and enforcement activities.

For example, in FY 2013, IRS customer service representatives provided a level of service to taxpayers of 61 percent compared to 68 percent in FY 2012. In addition, examinations of individual taxpayers declined more than five percent in FY 2013 compared to FY 2012 examinations. Collection activities initiated by the IRS, such as taxpayer liens, levies, and property seizures, declined by approximately 33 percent.

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