An overtaxed agency struggles with tax reform

Hate the Internal Revenue Service? Worried that you won't be able to fill out your returns correctly under the new tax law? Do not take it out on the poor IRS employee who could not answer your tax question, even after you spent a half-hour on hold. Blame the GOP-led Congress, which, in its anti-IRS fervor, has driven the agency into the ground.

It has become one of the most reliable traditions in contemporary Washington: Every year, the national taxpayer advocate explains that underfunding the IRS makes the tax filing process unnecessarily miserable for those who follow the law, while rewarding those who flout it. And every year, the Republican-led Congress decides to keep the tax system unnecessarily miserable for the law-abiding and easier on the lawbreakers.

"Funding cuts have rendered the IRS unable to provide acceptable levels of taxpayer service, unable to upgrade its technology to improve its efficiency and effectiveness, and unable to maintain compliance programs," national taxpayer advocate Nina Olson wrote in her annual report to lawmakers. "It cannot answer the phone calls it currently receives, much less the phone calls it can expect to receive in light of tax reform, without adequate funding."

Indeed, the new tax law could prompt a wave of confusion that the IRS is ill-prepared to handle. The agency estimates it needs about $500 million just to change computer programs, update forms, write new regulations and answer questions stemming from the bill. After the 1986 tax reform, agency call volume spiked, and the number of returns that required corrections also ticked up, and it is fair to expect the same now.

Though the IRS has tried to improve its phone service recently, even before the tax law passed it anticipated that fewer than half of callers would obtain help from a live person this year. Given the complexity of the new law, many people will have questions that are more than basic. "Taxpayers who want to learn about how the tax law affects them are left searching about 140,000 web pages on IRS.gov or turning to paid professionals," Olson wrote.

While the taxpayer advocate argued that the IRS could do more with less, there is no doubt that underfunding is a key driver of the dysfunction. Congress has cut the agency's budget by some $300 million since 2009, a bit under 3 percent. During that time, lawmakers have saddled the IRS with responsibility to oversee the phase-in of a new health-care law and, now, a major tax overhaul.

Can't the IRS — and the Americans it is supposed to serve — just cope? "On the surface, it appears 'customers' (taxpayers) don't have a choice about seeking another tax agency to work with — there are no competitors to which they can move their 'business,' "Olson wrote. "In fact, however, there is a competitor, and it is the lure of noncompliance. If the IRS isn't going to provide you the assistance you need in the manner you need it, then why bother complying with the tax laws?"