Taxpayer Advocate Report: IRS Budget Cuts Impact Service, Tax Compliance

11 Jul 2011 4:16 PM | Anonymous
National Taxpayer Advocate Nina Olson blasted budget cuts to the IRS's taxpayer service and tax compliance, saying the agency cannot meet its increased responsibilities with fewer resources without “cutting corners,” in a report to Congress released June 29.

The report identifies priority issues the Taxpayer Advocate Service (TAS) will address during the coming fiscal year, but focused on Olson's concern about the impact of IRS budget cuts on service and tax compliance, along with IRS lien-filing practices.

Olson pointed out that the IRS is being asked to implement new laws like the Economic Stimulus Payments, First-Time Homebuyer Credit, and Making Work Pay Credit, among other complex tax benefits that are challenging for taxpayers. These complicated provisions led to a rise in taxpayer inquiries and problems. However, the agency has reduced its ability to respond to phone calls and letters from taxpayers. The percentage of unanswered correspondence classified as “overage” at year's end increased by 135 percent when comparing the last week of fiscal years 2004 and 2010, according to the report, Fiscal Year 2012 Objectives.

Cuts to IRS's budget means the agency will lack resources to ensure all taxpayers have paid their taxes, and it will be unable to meet the service needs of taxpayers, the report said. “In recent years, the IRS has been given more and more tasks, but it is not receiving the resources it needs to fulfill these tasks without cutting corners,” the report said. “And when the IRS cuts corners, taxpayers can be harmed and revenue collection may suffer.”

The report also addressed other areas TAS will focus on in next fiscal year:
  • Taxpayer impact of a possible government shutdown;
  • Tax reform and complexity;
  • Earned Income Tax Credit improvements;
  • Tax-related identity theft; and
  • Innocent spouse relief.
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