Washington D.C. – The second tax filing season of the COVID-19 pandemic opens Friday, when the depleted and under-resourced IRS workforce is under the most pressure to assist taxpayers and help ensure the tax code is enforced fairly for all.
“NTEU has full confidence that IRS employees will deliver, again, a successful filing season. They do so, however, stretched far too thin. Multiple government watchdogs over the past few months have issued some version of the same warning: Ten years of IRS funding and staffing cuts continue to hamper customer service and enforcement,” said NTEU National President Tony Reardon.
Overall funding for the IRS has decreased roughly 20 percent over the last decade, according to the IRS Data Book. Adjusting for inflation, the IRS’s $12.1 billion budget in fiscal year 2010 would equal $14.3 billion in 2021, nearly $3 billion higher than the enacted budget of $11.5 billion for this year. As a labor-intensive agency, those cuts mean there are 20,000 fewer permanent IRS employees, especially those who enforce the tax code and protect the integrity of the system.
“IRS for too long has lived the ‘do more with less’ philosophy, but there are consequences to starving the very agency responsible for keeping our federal government running,” Reardon said. “Providing the IRS with the resources and personnel it needs would mean more responsive customer service, more audits to catch the scofflaws and greater confidence in our voluntary system of compliance.”
NTEU is far from the only organization concerned about rebuilding the IRS budget and workforce.
The National Taxpayer Advocate in November reported that in fiscal year 2020, the IRS, with a budget of about $11.5 billion, collected about $3.5 trillion in tax revenue for a “remarkable” return on investment. As Taxpayer Advocate Erin Collins said, “It is economically irrational to underfund the IRS.”
She also noted that telephone and in-person assistance for taxpayers is not as robust as it should be. In fiscal year 2020, IRS employees were able to answer only about 24 million of the 100 million phone calls that came into the agencies’ toll-free lines.
“IRS employees are just as frustrated as the taxpayers by the inability to answer all the calls,” Reardon said. “The role of the customer service representatives who answer calls to the IRS is to assist anxious taxpayers with questions and they would like to provide answers to more taxpayers.”
The IRS Advisory Council, once again, said adequate funding for IRS is the agency’s number one challenge for 2021.
“Adequate resources to allow the IRS to rebuild staff year-over-year in the form of $1 billion to $2 billion over current operating levels are both necessary and urgent to ensure an appropriate balance of service and enforcement,” the council wrote in its November report.
There are 45 percent fewer revenue officers and 40 percent fewer revenue agents than 10 years ago, which reduced the total enforcement revenue collected by $70 billion. The audit rate for millionaires is down 75 percent and audits of large corporations have dropped by half.
“The system only works if Americans can see that everyone who owes is paying up, so the agency needs to fortify its enforcement staff so that everyone – regardless of wealth – is following the rules,” Reardon said.
The U.S. Treasury Inspector General for Tax Administration continues to raise concerns about the tax gap: the difference in the amount that taxpayers should pay and the amount they pay voluntarily and on time. The latest estimate for the average annual gross tax gap is $441 billion.
“Every dollar invested in the IRS returns more in revenue to the U.S. Treasury,” Reardon said. “It is time to rebuild this agency so its employees can help more taxpayers, stop tax fraud and reduce the tax gap.”
As the Congressional Budget Office has noted, increasing the IRS enforcement budget is a serious option for reducing the federal deficit. In its estimate, a 10-year, $20 billion increase in IRS funding would increase tax revenue by $55.3 billion and decrease the deficit by $35.3 billion.
“The principal argument for the option is that increasing the IRS’s resources would not only reduce the deficit, on net, but would also improve tax compliance without raising taxes, broadening the tax base, or imposing new taxes,” the CBO report states.
NTEU represents employees in 34 federal agencies and offices.