IRS chief warns of de­layed re­funds

Bud­get cuts may be ‘cat­a­strophic,’ he says.

USA TODAY US Edition - - MONEY - Kevin McCoy

The IRS could face “cat­a­strophic” tech­nol­ogy break­downs that would de­lay re­funds for 100 mil­lion tax­pay­ers if Congress ap­proves ad­di­tional cuts in the agency’s bud­get, the de­part­ing com­mis­sioner, John Kosk­i­nen, warned Mon­day.

The In­ter­nal Rev­enue Ser­vice also could face a de­cline in vol­un­tary tax com­pli­ance. And it could con­front dif­fi­culty ad­just­ing its elec­tronic sys­tems to han­dle tax re­forms be­ing dis­cussed by Congress and the Trump ad­min­is­tra­tion, he said.

Kosk­i­nen, a light­ning rod for Capi­tol Hill crit­i­cism and even an im­peach­ment tar­get dur­ing his four-year ten­ure, used his fi­nal news con­fer­ence to is­sue don’t-say-you-were-never-warned pre­dic­tions about the po­ten­tial im­pact of deep cuts in the IRS’s bud­get and per­son­nel.

Ap­prox­i­mately 64% of the tax agency’s in­for­ma­tion tech­nol­ogy hard­ware sys­tems “are aged and out of war­ranty,” said Kosk­i­nen. Roughly 22% of the IRS’s soft­ware prod­ucts are “two or more re­leases be­hind the in­dus­try’s stan­dard, he said. As a re­sult, a tech­nol­ogy break­down “is not a ques­tion of whether, sim­ply a ques­tion of when,” he warned.

“If this fail­ure were to oc­cur dur­ing a fil­ing sea­son, we could be look­ing at a lengthy in­ter­rup­tion in pro­cess­ing re­turns and is­su­ing re­funds,” Kosk­i­nen said. “This could have a dev­as­tat­ing ef­fect on more than 100 mil­lion tax­pay­ers wait­ing on their re­funds, as well as the na­tion’s econ­omy, which sees some $275 bil­lion in re­funds each win­ter and spring.”

Bud­get cuts sim­i­larly have re­moved about 20,000 full-time IRS em­ploy­ees since 2010, in­clud­ing 7,300 key en­force­ment work­ers, Kosk­i­nen said. The tax agency au­dited fewer than 935,000 in­di­vid­ual tax re­turns in the 2017 fis­cal year, the low­est num­ber in 14 years, he said.

More­over, the num­ber of tax cases rec­om­mended for pros­e­cu­tion for non- pay­ment claims or other is­sues is 36% be­low the 2010 to­tal, he said.

“If peo­ple think that many oth­ers are not pay­ing their fair share or that they’re not go­ing to get caught if they cheat ... our vol­un­tary com­pli­ance sys­tem will be put at risk,” Kosk­i­nen said. “A 1% drop in the com­pli­ance rate trans­lates into a (fed­eral gov­ern­ment) rev­enue loss of over $30 bil­lion ev­ery year.”

Although IRS staffers are stretched with mul­ti­ple mis­sions, they’re pre­pared to make any changes re­quired by the tax re­form de­bates on Capi­tol Hill, he said. How­ever, rolling out those changes quickly could be dif­fi­cult if the pro­vi­sions are made retroac­tive to the 2018 tax fil­ing year, he said.

Say­ing, “I’m blam­ing Congress,” Kosk­i­nen vented about the bud­get cuts as he pre­pares to make way on Nov. 13 for in­terim IRS di­rec­tor David Kaut­ter, cur- rently the De­part­ment of the Trea­sury’s as­sis­tant sec­re­tary for tax pol­icy.

Some mem­bers of Congress have re­turned the sen­ti­ment as they trimmed the agency’s bud­get.

Capi­tol Hill con­ser­va­tives ac­cused Kosk­i­nen of im­prop­erly stymieing in­ves­ti­ga­tions of the IRS’s han­dling of the Tea Party and other con­ser­va­tive groups that had sought tax-ex­empt sta­tus. He de­nied the charges, and suc­cess­fully out­lasted im­peach­ment calls.

“I’m hope­ful that in the fu­ture the IRS and Congress can have a more ra­tio­nal and rea­son­able dis­cus­sion about the re­sources the agency needs to meet its very crit­i­cal re­spon­si­bil­i­ties,” Kosk­i­nen said.

“If this fail­ure were to oc­cur dur­ing a fil­ing sea­son, we could be look­ing at a lengthy in­ter­rup­tion in pro­cess­ing re­turns and is­su­ing re­funds.” John Kosk­i­nen IRS com­mis­sioner

John Kosk­i­nen vented about the cuts as he pre­pares to make way for in­terim IRS di­rec­tor David Kaut­ter. GETTY IM­AGES

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