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IRS Commissioner Warns of Impact From Proposed Severe Budget Cuts

Monday, October 17 2011

Washington, D.C.—Just as the leader of the National Treasury Employees Union (NTEU) has been emphasizing for some weeks , the head of the Internal Revenue Service (IRS) today warned that proposed cuts in IRS funding would have devastating impact—both short-term and long—not only on taxpayers, but on efforts to address the nation’s financial deficit.

IRS Commissioner Douglas Shulman said if the proposed full-year cuts of up to $650 million in fiscal 2012 IRS funding are enacted into law, the result would be “noticeable degradation of both service and enforcement, and would have a serious detrimental impact on voluntary compliance for years to come.” Shulman offered that bleak assessment in a letter to key members of Congress.

He offered these examples of the effects:
--A decrease of about $4 billion in revenue annually;
--Delays of up to five months in responding to taxpayer letters, including from taxpayers who have received an IRS notice about taxes due and who are seeking to resolve issues with their accounts;
--The inability of up to 50 percent of taxpayers seeking telephone assistance from the IRS to reach the agency.

He also warned that a small business owner would have difficulty reaching the IRS to work out a payment plan; delays in the release of liens for businesses that had paid their back taxes; difficulties for individuals to get through to an IRS representative to work out a payment plan; and trouble for taxpayers seeking help with such matters as tax deductions and credits Congress intended them to have.

Unfunded activities due to budget shortfalls could include those combating growing identity theft, cracking down on offshore tax evasion, processing thousands of offshore asset disclosures and meeting new legislative requirements, such as merchant card information reporting, Shulman said.

In recent weeks, NTEU President Colleen M. Kelley has warned of similar consequences in a press briefing and in letters to the congressional super committee and other members of Congress emphasizing the positive return on investment of funding IRS enforcement efforts, and the importance of the customer service work.

Along with the impact on IRS’s current operations and White House and congressional deficit reduction efforts, the NTEU leader noted this key agency already lacks the sufficient staffing and resources to address the growing gap between taxes owed and taxes paid. This ‘tax gap’ presently is some $345 billion annually.

“Congress must act to avoid the devastating impact on taxpayer services and deficit reduction that these proposed funding cuts would have,” Kelley said.

NTEU is the nation’s largest independent union of federal employees, representing 150,000 employees in 31 agencies and departments.

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