(Bloomberg) The IRS is freezing hiring, stopping most overtime pay and warning that it won’t answer about half the calls it will receive during the upcoming tax-filing season.

The spending law signed by President Barack Obama yesterday gives the Internal Revenue Service $10.9 billion for the fiscal year ending Sept. 30, 3 percent less than last year and 12 percent below the administration’s request.

“We have found substantial efficiencies in recent years, but there is little left to cut without hitting our core service and enforcement operations,” IRS Commissioner John Koskinen wrote today in a message to employees. “This year we will have little choice but to do less with less.”

Adjusted for inflation, Koskinen wrote, the IRS will have as much money as it did in 1998, when it processed 30 million fewer returns.

The budget cuts will make it tougher for taxpayers to get answers during the first filing season when taxpayers will be dealing with the implications of Obamacare, including the individual mandate to purchase health insurance and the tax credits that subsidize coverage.

The hiring freeze will have “only a few mission-critical exceptions,” Koskinen wrote.

The cuts will prevent the tax agency from collecting about $2 billion it would otherwise get through enforcement efforts, Koskinen wrote.

‘Negative Impact’
“I am concerned by this situation and alarmed at the negative impact this will have on taxpayers and our nation as well as our workforce,” he wrote.

Republicans in Congress pressed for the lower budget, partly as a way to curb the tax agency, which gave extra scrutiny to Tea Party groups seeking nonprofit status.

Republican representatives such as Speaker John Boehner and incoming Budget Committee Chairman Tom Price touted the IRS funding cuts as one of the reasons to vote for the spending bill.

Earlier today, Treasury Secretary Jacob J. Lew said in a statement that the IRS cuts were “irresponsible” and that the administration accepted them as part of a compromise.

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