Washington, D.C.—If you believe serious budget cuts to the Internal Revenue Service (IRS) have little to no effect on the public, think again. The harsh reality is that everyone from senior citizens to small business owners to victims of identity theft are harmed when the IRS budget is slashed, the leader of the union representing IRS employee said as the April 15 tax-filing deadline approaches.
“When you look closely, as our members do every day,” said President Colleen M. Kelley of National Treasury Employees Union (NTEU), “you see clearly how inadequate funding of the IRS seriously impacts the public, as well as small and large businesses, and our nation as a whole.”
A recent survey by NTEU of its IRS members about the effects of insufficient agency funding illustrates that view. For example, IRS employees reported that lack of staff to address identity theft—a fast-growing crime focused on securing fraudulent tax refunds—means that appropriate refunds for identity theft victims can be delayed by six months to a year.
The agency right now has nearly 650,000 active identity fraud cases; and the Treasury Inspector General for Tax Administration has warned of billions in fraudulent refunds over the next five years unless identity theft is adequately addressed.
Honest taxpayers are impacted another important way, as well. Reduced enforcement efforts caused by inadequate staffing tend to encourage scofflaws, shifting a costly burden to those who meet their tax obligation. IRS and Census Bureau data show that in 2006, the average U.S. household effectively paid an extra $3,300 to subsidize noncompliance by others. The gap between taxes owed and taxes paid currently is put at some $400 billion annually.
“The tax-avoidance citizens are going to get away with cheating the government due to lack of resources,” one NTEU survey respondent said.
These are not the only issues, either. With significantly less staff—even before the cuts mandated by sequestration and the resulting potential for unpaid employee furloughs—the IRS has had to cut back on free tax return preparation, especially at its walk-in Taxpayer Assistance Centers (TACs). In particular, this harms seniors and low-income taxpayers who often do not use or have computers, as well as those seeking help with a specific question or simply trying to navigate the tax code.
Last year, for example, the IRS said 107 out of 389 TACs across the country were staffed by just one or two employees, while overall TAC staffing was half the level of eight years ago. This filing season, long lines beginning in the pre-dawn hours well before the offices open and lengthy waits for help are common at TACs everywhere.
Among other survey findings:
• Those seeking assistance encounter long wait times on the telephone. In fiscal 2012, the agency was able to handle only 68 percent of calls seeking help, with callers having to wait an average of 17 minutes on hold. By contrast, in 2004, the IRS was able to answer 87 percent of its calls, with an average wait time of 2 ½ minutes. This filing season, Mondays and Tuesdays tend to be the busiest days, and afternoons often are a little easier getting through. Taxpayers should note, too, that employees answering the phones are not responsible for long wait times.
• Cuts are seriously impacting the agency’s ability to conduct taxpayer education and outreach, a particularly important activity for small business owners;
• There simply is not enough IRS staff to handle all the hardship cases seeking help, leading to long delays for those citizens;
• Nor enough personnel to provide sufficient foreign language assistance—a serious problem for non-English speakers, compounded by the increasingly complex tax code;
• Taxpayers who owe money after audits are seeing higher penalty and interest charges than if their cases were able to be handled on a more timely basis; and
• Those filing an amended return and seeking a refund are finding the processing time extended by a month, from 12 weeks to 16
Frontline IRS employees feel the frustration from the lack of resources. “We are doing as best we can with a staff of 14 that used to be a staff of 32,” one said in a survey comment.
The nation itself is ill-served by inadequate IRS funding, President Kelley said. “The fact is that every single American pays a price when we fail to invest in the IRS,” noting that the agency collects 93 percent of all government revenue.
“Without an effective revenue collection agency, there is not enough money to fully fund other government agencies, and that impacts such critical federal services as border security, food safety and national defense,” she added.
NTEU is the largest independent federal union, representing 150,000 employees in 31 agencies and departments, including the entire IRS bargaining unit.