Internal Revenue Service Commissioner Doug Shulman issued a dire warning to Congress about the effects of steep budget cuts on the agency’s enforcement ability and services.

The House Appropriations Committee has passed legislation cutting the IRS budget by $600 million, providing the IRS with $11.5 billion in fiscal year 2012. The Senate Appropriations Committee was more generous, providing $11.7 billion for the IRS, but both amounts would be far below what the IRS was given last year.

In a letter to the leaders of the House Ways and Means Committee and the Senate Finance Committee, Shulman acknowledged that the federal government faces budget challenges, but he cautioned against the effects on the IRS and taxpayers if the budget cuts voted out of the House and Senate Appropriations Committees were ultimately enacted. 

“I recognize the fiscal challenges facing the nation and am committed to continuing to look for savings in IRS operations where we can improve efficiency without cutting into core taxpayer service and front-line enforcement,” Shulman wrote. “To that end, over the last several years the IRS has maintained a disciplined focus on identifying cost-effective solutions in order to maximize IRS productivity. For example, through our focused efforts to increase electronic filing of tax returns, we have cut the number of tax return processing sites in half—from ten to five. Through this effort and other targeted efficiency programs, we have generated hundreds of millions of dollars in savings. However, cuts of the magnitude contemplated in the current appropriations bills (approximately $525 million from core IRS accounts in the Senate bill and $650 million in the House bill) would lead to noticeable degradation of both service and enforcement and would have a serious detrimental impact on voluntary compliance for years to come.”

He noted that a small business that fell behind on its taxes would have trouble reaching the IRS to work out a payment plan if the budget cuts were enacted, and an individual taxpayer who has received an IRS notice that it is about to levy his bank account because of unpaid taxes would also have trouble getting through to an IRS representative.

Shulman also argued that slashing the IRS's budget would be counterproductive if Congress aimed to narrow the budget deficit. "Of course, I respect the Congress's prerogative to set funding for the IRS as it sees fit, but higher funding levels for the IRS would also help reduce the deficit," he wrote.

House Ways and Means Subcommittee ranking member John Lewis, D-Ga., agreed with Shulman and said he had serious concerns about House Republicans’ plan to slash the IRS budget. “This letter makes clear that the Republican budget will harm taxpayers, harm tax administration, increase the deficit, and cost the treasury $4 billion dollars a year,” he said in a statement. “This makes no sense, particularly at a time when Medicare, Medicaid, and Social Security are under attack in the name of deficit reduction.”

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