The IRS has seen budget cuts in recent years, and that is taking its toll on the agency. While many taxpayers might breathe a sigh of relief at the idea that they may not be audited, the reality is that a small budget also means worse taxpayer service.
Fewer Tax Audits in Recent Years
Tax audits have been on the decline in recent years, thanks to budget cuts. Personnel tasked with enforcement have been lost to attrition over the last few years and haven’t been replaced. Congress allows for less and less in the IRS budget, meaning that replacements aren’t trained and replaced.
According to a story from CNN Money, the IRS conducted only 1.2 million individual audits this year. While that might seem like a lot, when you realize that there are right around 140 million tax-paying households in the United States, you can see that there isn’t a very big chance that you will be audited.
Not only are the number of audits at their lowest level in 11 years, but the revenue received from the audits is at a 13-year low. From 2005 to 2010, the IRS collected an average of $14.7 billion annually from audits alone. Now that number is down to $10.5 billion annually. The IRS points out that Congress in its rush to save a few hundred million dollars is giving up billions in revenue.
IRS Budgets Cuts and Taxpayer Service
A few years ago, I had a question about my tax return. I called the IRS and received timely information. Today, though, my experience would be rare. The IRS Commissioner, according to CNN Money, points out that last year only about 40% of calls to the IRS were answered. Many taxpayers ended up being on hold for up to two hours — before being disconnected because of system overloads.
Even as the IRS is trying to project a less-threatening image to the public, the agency continues to receive complaints that it is too slow with service. And it is. There were long lines at IRS service centers last year, and getting a hold of someone to talk to on the phone can be a difficult and frustrating process.
However, there is a chance that Congress won’t provide extra funds to the IRS. The IRS Commissioner wants to upgrade the phone system to a “virtual” hold that calls taxpayers back when an agent is available, rather than forcing them to wait on hold. Unfortunately, the cost of the system ($45 million) might mean that Congress won’t agree. In fact, there are some worries that Congress will, yet again, cut funding for the IRS when it makes the next budget.
According to the agency, the ROI for every dollar put into the IRS is about $4. Even with that solid return on investment, though, lawmakers are reluctant to add more to the pot. And that means that we are likely to keep seeing fewer audits, and taxpayers looking for service from the IRS are unlikely to get what they need.