Weakening of the IRS opens door to scammers, high-dollar cheats
No federal agency generates as much rancor as the IRS, part of that duo of inevitability, taxes and death. Despite its reputation for toughness, the IRS relies on voluntary compliance, as in Americans’ sense of duty, to collect the money that powers our government.
That’s more true than ever, because as it prepares to implement the most sweeping tax overhaul in 30 years, the IRS is perhaps weaker than it has ever been. In 1986, the last time Congress passed major changes in the tax code, it included a budget increase for the agency, allowing it to hire 2,100 more employees to carry out the changes. Last year, as the agency struggled to do its job with a decimated staff, a shrinking budget and decrepit computers, its commissioner pleaded with Congress to at least give it time to prepare for the big tax overhaul Republicans wanted.
That didn’t happen. Instead, Republicans rushed hastily written legislation larded with amendments through both chambers. Even before this hash hit their desks, IRS officials were warning about the potential for a catastrophic breakdown that could imperil our tax system. Then, at its busiest time of year, the agency was given a week before the tax law went into effect to translate hundreds of pages of conflicting provisions, potential loopholes and unintended consequences into coherent guidance for taxpayers.
“On behalf of the hardworking Americans across the nation who are eager to see their paychecks reflect the benefits of this historic legislation, I request that you expedite any requisite updates to the relevant guidance on withholding,” reads a self-serving letter to the IRS from Sen. Rob Portman, R-ohio. “Please keep me apprised of the process so that I may relay to my constituents what they ought to expect in the coming year and when to expect it.”
Americans got a hint last week of what they can expect, when thousands tried to pay their 2018 property tax bills in advance, hoping to claim a deduction before provisions sharply limiting the deductibility of state and local taxes take hold Jan. 1. Then the IRS issued guidance narrowing that loophole, generating confusion and fury.
Americans should reserve their rage for Republicans, who have spent years targeting the IRS for political gain. Since 2010, Congress has cut the agency’s budget by nearly $1 billion, or 18 percent, adjusted for inflation, as the IRS processes about 10 million more tax returns. Its workforce has been whacked by nearly one-quarter; taxpayers who need help have a hard time getting anyone to answer the phone.
This underscores the peril of demagoguing the IRS. It’s not the little guy who benefits most from diminishing the agency; it’s the scam artists and sophisticated high-dollar cheats.
The size of the compliance staff — the professionals who go after tax evaders — has shrunk by one-third, and the ranks of criminal special investigators are thinner than at any time since the Nixon era. New methods and partnerships allow the IRS staff to detect more sophisticated fraud, but the number of audits the agency can pursue is at its lowest point in 14 years. While our audit-prone president might be cheered by that, just a 1 percent drop in compliance means $33 billion less going into the Treasury. That’s enough to pay for more than two years of the Children’s Health Insurance Program, the coverage for 9 million low- and moderate-income children that Republicans can’t seem to find the money to renew.
As in the rest of the federal government in general, the IRS’ antiquated computers use the programming language COBOL, created more than a half-century ago. Every day, the agency catches a million attempts to infiltrate its computer systems by hackers and cyberterrorists intent on stealing taxpayer data.
There is no permanent commissioner leading the IRS. Its last one, John Koskinen, left in November at the expiration of his term. Koskinen had spent a big chunk of his time on Capitol Hill, being lambasted by Republicans over allegations that the Obama-era IRS unfairly targeted conservative political groups seeking tax-exempt status. A report released in October by the Treasury Department’s inspector general found that the IRS had also scoured left-leaning groups’ applications for tax-exempt status as part of its effort to identify groups focused on politics, not “social welfare,” as the rules for tax-exempt status require.
The agency apologized for its improper audits, and a Justice Department investigation found mismanagement but no evidence of a crime. Though the audits occurred before Koskinen came aboard, Republicans clamored for him to be impeached, an action not taken against an administration official besides the president since the 1870s. The dumb and unsuccessful effort was led by legislators like Jason Chaffetz, then a Republican congressman from Utah, who view the IRS as symbolic of “big government” and think that killing it outright might be a good idea.
Despite its diminished state, the agency has managed to improve some operations and protect taxpayers. During the 2016 fiscal year, the IRS intercepted more than $6.5 billion in fraudulent refunds claimed on 969,000 tax returns filed by identity thieves. Staff members worked to break up and inform the public about multiplying tax scams, including one run from Indiabased call centers in which callers impersonating IRS agents bilked people, many of them recent immigrants, of more $100 million since 2013, and an email identity-theft scam targeting Hotmail users. Tax investigators have gone after holders of illegal offshore accounts and helped recover billions stolen from the Treasury by filers of bogus returns.
Pounding a punching bag like the IRS scores easy political points among Americans who associate the agency with an unpleasant April deadline. We get it. But if the agency that collects more than 90 percent of the government’s money stumbles, all Americans pay, and they can look to Congress, not just the IRS, in assigning the blame.