(Washington, DC) The IRS Oversight Board today released its recommended FY2009 budget for the Internal Revenue Service. At $11.737 million, the budget is an increase of $845 million over the FY2008 appropriation of $10.892 billion and is $376 million, or 3.3 percent, over the President’s request of $11.361 billion. The Board’s budget recommends funding across the broad spectrum of IRS programs and taxpayer segments with a focus on investments in technology, research, and human capital.
The IRS Restructuring and Reform Act of 1998 (RRA 98) requires the Oversight Board to review and approve the IRS-prepared budget submission and for the President to submit to Congress without revision the Board’s budget along with the Administration’s proposal.
The Board’s proposed FY2009 budget is closely aligned to and supports the IRS’ five-year strategic plan (FY2005-2009). While reducing the tax gap remains a core objective, the Board’s budget request stresses balance across the IRS’s three strategic goals: (1) improve customer service; (2) enhance enforcement of the tax law; and (3) modernize the IRS through its people processes and technology.
“In crafting this budget, the Oversight Board took the long-term view – what we need to do now and in the out-years to improve performance and help advance the broad vision and goals set forth by the Restructuring Act,” said IRS Oversight Board Chairman Paul Cherecwich. “This budget proposal is not merely the opening round of the appropriation’s process. Rather, it’s a reflection of what the Board believes must be done to help ensure the long-term fiscal health of our tax administration system and the nation. It’s about priorities and commitment,” he added.
The Board Chairman went on to address the $290 billion net tax gap that has dominated IRS budget discussions for the past five years. “Certainly, reducing the tax gap remains an enormous problem and there’s the temptation to throw as many bodies and resources at it as possible. However, enforcement-centric fixes ignore the complexity of the tax gap. It is made up of many components, including taxpayers unable to understand their obligations under the law. The IRS can not audit its way out of the tax gap. However, with a balanced program of customer service, enforcement and modernization we can improve overall compliance. That is the ultimate goal.”
Improve Taxpayer Service
The Board’s FY2009 budget proposal would help the IRS to build on the customer service gains it has achieved since FY2001. The Board believes that to go from “good to great”, and improve customer service beyond what is familiar and available today, the IRS must execute its five-year Taxpayer Assistance Blueprint. To this end, the Board recommends $26.3 million be added to the IRS’ taxpayer service programs. The President’s budget reduces taxpayer service programs by $47 million.
Enhance Enforcement of the Tax Law
The Board believes that an integrated set of comprehensive actions is needed to reduce the tax gap in a meaningful way. Although the Board’s and the President’s budget requests for enforcement are close in dollars, the Board takes a broader view of enforcement, and recommends program increases in areas such as: expanded collection of taxes from recipients of federal payments, investigation of tax-related criminal activity, Bank Secrecy Act compliance, tax exempt organization examination, more published guidance for tax exempt taxpayers, additional litigation staff and tax preparer monitoring. The Board also believes that the different IRS organizational units may have difficulty absorbing the new enforcement hires proposed in the President’s budget.
Modernize the IRS through its People, Processes and Technology
The Oversight Board has long advocated funding IRS Business Systems Modernization (BSM) at a higher level to increase the program’s pace and progress. Given its long-term importance to reducing the tax gap, easing taxpayer burden, improving customer service and providing greater efficiencies, increased funding for BSM becomes an even greater priority. The Board recommends that BSM funding be restored to FY2003 and FY2004 levels. The Board recommends an additional $140 million for BSM funding; the President’s budget reduces BSM funding by $45 million.
The Board also recommends six program initiatives totaling $103 million that will improve IRS operations by allowing the Agency to make critical improvements to its technology and personnel infrastructure that were not included in the President’s budget. The Board thinks these initiatives are critical components to ensure IRS can protect its computer systems and data. Three of the initiatives ($32.2 million) would enhance IRS security, protect taxpayer data and safeguard against disasters and unauthorized activities. Some of the remaining initiatives would, for example, help the IRS retain its quality IT workforce.
The full Board Budget Report can be found at: http://www.treasury.gov/irsob/reports/