(Washington, DC) The IRS Oversight Board today released its Fiscal Year (FY) 2015 IRS Budget Recommendation Special Report that supports the President's $12.47 billion request for the agency. The IRS FY2013-post sequestration funding level was at its lowest level since FY2009. For FY2014, the IRS was one of only a few government agencies not to see its budget restored to pre-sequestration levels.
The report states that uncertainty in the budget process and persistent limited funding have hindered the IRS in its ability to address long-term strategic goals and initiatives. The Board has long contended that under-funding the IRS only punishes taxpayers and endangers the fiscal health of the nation and critical programs upon which millions of Americans depend.
The report attributes recent declines in customer service, enforcement, training, and scaled back investments in information technology to budget shortfalls. "The Board has watched with growing concern over erosion in both customer service and enforcement that shows no sign of abating," said Board Chairman Paul Cherecwich, Jr. "We are quickly reaching the point where the IRS will not be able to meet basic taxpayer expectations because of inadequate funding. The current budgetary path is not sustainable and must be reversed. The President's FY2015 budget request for the IRS does exactly that," he commented.
The report notes that since FY2010, taxpayer service and infrastructure needs have increased, while funding for taxpayer assistance, education, and outreach have decreased. As a result, the level of service for taxpayers on IRS toll-free telephone assistance lines dropped to what the Board considers to be an unacceptable level while wait times increased. Long lines greeted taxpayers at IRS walk-in centers this filing season, while services were scaled back or eliminated. Taxpayer correspondence has also been piling up and investments in technology have fallen behind due to under-funding.
The Board's budget report also finds that IRS enforcement is similarly suffering. The overall audit coverage rate for individuals fell below one percent for the first time since FY2006. The coverage rate for businesses also decreased across all business returns. In addition, there were declines in enforcement personnel, as the number of IRS revenue officers and revenue agents continued to fall in FY2013.
Compounding these challenges are unfunded legislative mandates the IRS must administer, such as implementing the tax-related portions of the Foreign Account Tax Compliance Act and the Affordable Care Act. When new statutory responsibilities are assigned to the IRS without congressional funding, the IRS must take money and personnel away from other core programs, such as customer service and enforcement. The growth of identity theft and refund fraud, a shrinking workforce, and an aging technology infrastructure are also major systemic problems.
"The Board recognizes the current fiscal environment may likely persist in future years," observed Mr. Cherecwich. "The Board supports the President's Budget Request because it addresses and makes targeted and wise investments in many of the same areas of concern voiced by the Board, such as improving telephone level of service and audit coverage."
The report underscores the Oversight Board's role in providing a nonpartisan voice as to tax administration needs and it encourages Congress to consider the needs of taxpayers and the long-term stability of the tax system while making funding decisions.
"The Board believes that we need to have a nonpartisan dialogue about the IRS' budget and the effects – good or bad – appropriated funding levels can have on customer service, enforcement, Business Systems Modernization, and human capital," said Mr. Cherecwich. "In spite of the often heated rhetoric, we should not shy away from the simple fact that there is a choice about the future of tax administration," he concluded.
The full report can be found at http://go.usa.gov/kzd3.