Why Filing Your Taxes May Be a Nightmare This Year
Taxpayer satisfaction with the IRS is already at a record low. It's about to get worse.
A report last week from the Taxpayer Advocate Service -- an independent watchdog within the Internal Revenue Service -- found a cascading series of problems at the agency that are likely to make the grim task of filing tax returns even more burdensome.
This year, the IRS will be able to answer less than half the phone calls it receives. Callers who do get through will likely be on hold for 30 minutes or more. Even then, agents will respond only to "basic" tax-law questions, something very close to a contradiction in terms.
The agency's ability to respond to written correspondence -- the primary way it communicates with taxpayers about things such as filing errors and penalties -- is collapsing. And the hundreds of thousands of poor, elderly and handicapped filers the IRS once helped with their returns are now on their own.
Since 2010, Congress has cut the IRS's budget by more than $1 billion. The agency's workforce has been reduced by more than 12 percent. And its training budget has shrunk by 83 percent, even as it faces new burdens imposed by the Affordable Care Act, the Foreign Account Tax Compliance Act and a surge in identity thefts.
Yet still more cuts are looming. As part of the spending deal Congress reached last month, the IRS budget for 2015 will be reduced by about $346 million. The agency's commissioner told staff last week that this could mean delaying tax refunds, postponing technology investment, reducing audits and furloughing workers.
Republicans in Congress have celebrated these cuts, arguing that, among other things, the IRS's training seminars have been too elaborate, that its bonuses have been too profligate, and that it unfairly scrutinized Tea Party groups seeking tax-exempt status.
Let's concede that they're right on every count. How does cutting the IRS budget help? It will lead to lower federal revenue and hence higher deficits. It will worsen service for taxpayers of all parties. It will mean a continuing subsidy for wealthy tax avoiders, to the tune of some $385 billion a year. And it will in all likelihood encourage talented workers to leave the IRS for the business world, where their skills are in demand.
In other words, it will punish just about all Americans except the ones Republicans are mad at.
An obvious solution to the IRS's woes is to give it more money, commensurate with its growing responsibilities -- especially since each additional dollar allocated to the IRS for enforcement yields $6 in government revenue, and 61 percent of the public favors boosting spending for taxpayer services. A better way to hold IRS employees accountable for misconduct, meanwhile, is through improved oversight, management and performance metrics.
Of course, the best approach for everyone -- Congress, the IRS, the American voter -- would be a comprehensive tax reform that would lower rates, end most exemptions and loopholes, and drastically simplify the Internal Revenue Code. That's probably too much to hope for anytime soon. But the start of a new Congress, like the start of spring training, is a good time for excessive optimism.
--Editors: Timothy Lavin, Mary Duenwald.
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