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IRS Oversight Board Issues Annual Report to Congress 2013; In Spite of Controversies, Board Finds IRS Performed at an Overall Solid Level

(Washington, DC) The IRS Oversight Board released its Annual Report to Congress 2013 today and stated that although the past year was marked by "controversy, change, and challenges," the agency delivered a successful 2013 filing season in spite of last minute retroactive tax changes enacted by Congress. However, the Board expressed strong concerns over continued cuts to the IRS' budget, stating that "underfunding the IRS only punishes America's taxpayers and endangers the fiscal health of our nation and critical programs upon which Americans depend."

Although last year's media coverage of the IRS was dominated by the tax-exempt issue and other controversies, the Board said it is important to recognize that the IRS still performed at an "overall solid level" in 2013. In addition to the successful filing season, which included a single-day record for processing individual e-filed returns, there were a number of other significant accomplishments discussed in the report.

For example, the Government Accountability Office removed the IRS' Business Systems Modernization program from its "high-risk" list, citing the progress the IRS made in addressing information technology and financial management weaknesses. The IRS also successfully implemented tax-related provisions of important legislation, such as the Affordable Care Act and the Foreign Account Tax Compliance Act, and provided for significant taxpayer burden reduction, including a simplified method to claim a home office deduction, as well as a retooled corporate audit approach.

"We recognize this was a very challenging year for the IRS," said IRS Oversight Board Chairman Paul Cherecwich, Jr. "In addition to the heated political atmosphere, there was the budget sequestration forcing furloughs and other cuts throughout the agency, including the continuation of a hiring freeze. But to its credit, the IRS workforce rose to the occasion. Their dedication and determination paid off in a number of areas that benefited taxpayers, such as faster processing of returns, better service for victims of identity theft, and new online service options. We commend them for their efforts."

The Board's annual report also acknowledges that budget constraints are beginning to affect IRS performance, much to the detriment of taxpayers and tax professionals. Level of service on IRS toll-free telephone lines fell dramatically in Fiscal Year (FY) 2013, while average wait times to speak with IRS representatives increased. Audit coverage and enforcement actions such as liens, levies, and seizures also declined. While some progress has been made, tax-related identity theft remains a major challenge and risk area for the IRS.

The Board also expressed concern over the large-scale turnover of senior executives in 2013, and the potential for additional attrition in the future. In the Board's view, this is an enormous human capital risk. The Board will continue its focus on how the IRS manages this risk, especially as it relates to executives with specialized institutional knowledge. Additionally, the Board found that the events of 2013 may have played a major role in the IRS dropping nearly eight points in employee satisfaction in the Best Places to Work in the Federal Government survey. 

In the report, the Board agreed with Commissioner John Koskinen's sentiment that the IRS' budget is the most intractable issue the IRS faces. Post-sequestration funding for the IRS is the lowest it has been since FY2009. The Board urges Congress to restore funding to the agency. The report also calls upon the Administration to move forward and quickly fill the five private life member vacancies on the Oversight Board. "With only two private life members, the Board has lost a significant portion of diversity and richness of experience," the report concludes.

The Board's Annual Report to Congress 2013 can be found at http://go.usa.gov/KdrF.

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