The Internal Revenue Service’s extra $290 million in funding this year helped the IRS improve its level of responsiveness to taxpayer phone calls, according to a new report.
The report, from the Government Accountability Office, found that processing of individual income tax returns in 2016 has gone relatively smoothly through mid-February and the IRS anticipates improved taxpayer service, due in part to the additional funding it received this year.
The IRS has provided improved telephone service through mid-February compared to the same time last year. The level of service was 76 percent (a 33 percentage point increase) while the average wait time dropped to 9 minutes (an improvement of about 70 percent).
The IRS projects that the percentage of callers seeking live assistance who receive it (level of service) will increase from a low of about 38 percent for fiscal year 2015 to 47 percent for fiscal year 2016—including 65 percent for the filing season. The IRS also projects average telephone wait time will improve from about 31 minutes for fiscal year 2015 to about 26 minutes for fiscal year 2016. However, the GAO noted, this will still be about twice as long as the wait time for fiscal year 2011.
IRS Commissioner John Koskinen pointed to the improved levels of taxpayer service during a speech last month (see IRS Improves Phone Call Responsiveness).
The improved customer service, including for telephones, can help increase voluntary tax compliance, the GAO noted. The IRS took steps in 2016—including re-assigning staff from enforcement to customer service and providing overtime—to help improve service. In addition, the IRS is working with industry partners to combat identity theft refund fraud and improve cybersecurity efforts to protect taxpayer information.
Even though the IRS’s fiscal year 2016 appropriation increased by $290 million to $11.2 billion over fiscal year 2015, it is still about $900 million (7 percent) lower than fiscal year 2011, the GAO pointed out. The IRS allocated the funds across three appropriation accounts: taxpayer services ($176.8 million), operations support ($108.2 million) and enforcement ($4.9 million).
Tony Reardon, national president of the National Treasury Employees Union, which represents IRS employees, told reporters during a conference call Thursday that the funding boost was not enough.
“The takeaway message from the 2016 tax season is this,” he said. "It is that the IRS is continuing to struggle to deliver for the American taxpayer. I think there is no question but that the IRS needs more resources and they need more personnel to meet the demand for taxpayer services, to catch tax cheats and criminals, to effectively fight identity fraud, to enforce the tax laws, and to collect all the taxes that are owed. The reality is that unless Congress provides the IRS the resources that it needs to hire the people it needs, taxpayers aren’t going to get the assistance that they expect and quite frankly resources that they deserve. Tax fraud will continue to increase, ID theft will escalate and more and more tax revenues will go uncollected. The $290 million increase in funding for the IRS in FY ’16 has helped a little bit in terms of customer service, but it is nowhere close to being sufficient.”
In response to a question from Accounting Today about his reaction to the GAO report, Reardon said he had not yet seen the report, but he pointed out that the additional 1,000 temporary employees hired by the IRS with part of the $290 million helped improve the number of calls that were answered this tax season. “If you just look at it from that perspective, there has been some improvement, but these are temporary employees who are going to go away at some point in this fiscal year, and the concern candidly is that the number of calls answered is going to drop considerably once again,” he said.
For fiscal year 2017, President Obama requested $12.3 billion in appropriations for the IRS, approximately a $1 billion increase (9 percent) over the level of funding received by the IRS in fiscal year 2016. This includes $515 million in a program integrity cap adjustment. Excluding the spending cap adjustment, which would require separate legislation, the request is $11.8 billion, a 5 percent increase. The IRS may also allocate other budgetary resources, such as user fee revenue, the report noted.
In fiscal year 2015, transfers of user fees ($454 million) accounted for 3.8 percent of total available resources ($11,976 million). Full-time equivalents funded with annual appropriations declined by 12,000 (13 percent) between fiscal years 2011 and 2016.
After years of taking short-term actions such as limiting hiring and curtailing overtime, the IRS is now taking steps to strategically manage its resources by identifying priorities in formulating its 2017 budget request.
The GAO noted that it still has recommendations open to the IRS—including 10 priority recommendations—that would help the agency better manage operations and improve taxpayer service. Implementing these recommendations is a key step in reducing the $385 billion net tax gap, as well as in strengthening tax administration and service to taxpayers.
The National Treasury Employees Union argues that the problem comes down to funding and manpower. According to data released Thursday by the NTEU, between 2011 and this year, the IRS lost 22,808 full- and part-time employees nationwide—a 21 percent staffing cut.
On a state-by-state basis, between 2011 and 2016, the IRS job-loss rate was the highest in Delaware and Alaska—41.4 percent. Montana lost 39.2 percent of its IRS jobs in that five-year span, Hawaii 37 percent and Wyoming 36.5 percent.
In raw numbers, California lost more IRS employees than any other state in that five-year period: 3,776 people. Other hard-hit states were: Georgia with 2,051 IRS job losses; New York with 1,554; Texas with 1,397; and Utah with 1,346.
The IRS collects 93 percent of all federal revenue, the NTEU noted, but maintaining that level of revenue collection remained a major challenge for front-line employees due to staffing shortages.
According to the IRS Data Book, since 2010 the agency has lost more than 6,000 enforcement personnel, revenue agents and revenue officers who perform audits and collections. Koskinen said recently that the IRS would be able to collect an additional $64 billion in tax revenue over the next 10 years if Congress approves the White House’s FY17 budget request for IRS enforcement programs.
In a speech earlier this month, President Obama said his administration is working hard to enforce the tax laws passed by Congress but it gets tough “when the IRS is starved for resources and squeezed by the congressional appropriation process.”
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