(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
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