IRS sinking under workload
Staff cuts make contact difficult,
“This is the lowest staffing level I’ve ever seen, and I’ve been with the IRS 26 years.”
David Carrone, National Treasury Employees Union
At 12:30 p.m. Monday, about 50 people waited for help at the IRS center in Fort Myers, Fla. Another dozen who couldn’t find seats stood in a line that stretched out the office suite door and into a lobby.
At the walk-in center in East Harlem, N.Y., Belquis Castillo, 40, left in exasperation Monday afternoon after waiting more than an hour. Castillo needed copies of her 2010 tax return so her son can enroll in online college courses, but was told the computers were down.
The long waits are the result of the IRS’ expanded workload and diminished workforce, says IRS Taxpayer Advocate Nina Olson, whose 2011 annual report identified inadequate resources as the most serious problem facing taxpayers. In 1995, the IRS had a staff of 114,018 to process 205 million tax returns. In 2012, it has 90,907 people to process nearly 236 million tax returns. For this tax filing season, the IRS has 5,000 fewer employees than it did a year ago.
“This is the lowest staffing level I’ve ever seen, and I’ve been with the IRS 26 years,” says David Carrone, president of the Louisiana chapter of the National Treasury Employees Union (NTEU). The New Orleans Taxpayer Assistance Center has six employees, down from 12 eight years ago, Carrone says. Sometimes, it doesn’t even have that many: Louisiana has several one-person walk-in centers, and when that employee calls in sick, someone from the New Orleans office has to fill in.
Increasing the IRS’ budget has never been
politically expedient, and the Republican Party’s anti-tax message has made the agency even more unpopular, says Bruce Bartlett, an economist who worked in the Reagan and George H.W. Bush administrations. “Beating up on the IRS is never going to hurt you politically, regardless of which party you’re in, and we’re paying the price for this kind of attitude.”
The IRS has sought to deal with limited resources by encouraging electronic filing and directing taxpayers to its website, Irs.gov. It offers an automated service for frequently asked questions and has launched a pilot program that uses video technology to connect taxpayers at walk-in centers with an IRS employee at another location, IRS Commissioner Doug Shulman says.
“We continue to innovate, and I think we serve the American people well, given the resources we have,” he says.
Nonetheless, there are times when taxpayers or tax preparers need to talk one-on-one with the IRS, and that’s becoming increasingly difficult, says James Smith, a certified public accountant and former chairman of the Texas Society of Certified Public Accountants.
Smith says the hold times for his calls to the IRS range from 30 minutes to an hour and 45 minutes. “I’ve had to ask my secretary to stay on hold so I can go to the bathroom.”
Staff shortages have also delayed IRS responses to letters from taxpayers seeking to resolve issues or set up payment plans, according to the NTEU. Some of these hold-ups can result in financial hardship for taxpayers, Smith says. One of his clients waited four months to get his refund after Smith filed an amended return. During that period, the client almost lost his home to foreclosure, Smith says.
Why it’s getting harder to get in touch with the IRS:
-Complexity. Between 2000 and 2010, Congress made 4,428 changes to the tax code, including 579 in 2010 alone, according to tax publisher CCH.
Every time Congress adds a provision to the tax code, the IRS must update its computers, which increases its workload, Olson said in her 2011 report.
The strain on IRS resources is compounded when the changes come late in the year, Olson said. In 2010, for example, Congress made significant changes in the tax code in late December, forcing the IRS to delay processing millions of tax returns that contained itemized deductions until mid-february.
Next year’s tax filing season could be even worse, Shulman said in recent remarks before the National Press Club. On Dec. 31 this year, the tax cuts adopted during the Bush administration are scheduled to expire. The payroll tax cut adopted by the Obama administration is also scheduled to end. In addition, a host of tax “extenders,” including one that prevents a broad expansion of the alternative minimum tax, expired on Dec. 31 last year.
There’s broad disagreement between Democrats and Republicans about how to handle the expiring tax cuts, and a resolution before the November presidential election is unlikely, political analysts say. A late-year compromise could force the IRS to delay processing of 2012 tax returns for many taxpayers, Shulman said. If Congress waits until next year and makes retroactive changes, “you could have a real disaster in the filing season,” he said. “It’s an issue we’re tracking very closely, and we’re quite concerned about.”
-Fra-d. The IRS has become an increasingly popular target for identity thieves, who use stolen Social Security numbers to file fake tax returns and collect refunds. In January, the IRS arrested dozens of suspected identity thieves in 23 states as part of a national crackdown.
Taxpayers usually don’t know they’ve been targeted until their tax returns are rejected by the IRS. Some victims have had to wait up to a year to get their refunds while the IRS investigates the crime, says Lu-ann Dominguez, a tax attorney in Fort Lauderdale.
While the IRS has made significant progress in deterring identity theft, it lacks sufficient personnel to help those who have been victimized, Olson said in her annual report. Unlike many other IRS services, Olson said, assisting identity theft victims usually can’t be automated. IRS personnel must work directly with victims to verify they are who they say they are and resolve the problem, she said.
-Other responsibilities. In addition to collecting $2.4 trillion in taxes, the IRS is increasingly being asked to administer other government programs. “Every time Congress does something new, it has to do with the tax code,” says Lonnie Gary, chairman of government relations for the National Association of Enrolled Agents.
For example, the IRS plays a key role in implementing the Affordable Care Act, the Obama administration’s health care law. Since 2010, the IRS has been responsible for administering a provision in the law that provides a health care tax credit for small businesses.
The IRS will also be responsible for administering the most controversial aspect of the law, if the Supreme Court doesn’t overturn it: the individual insurance mandate. Starting in 2014, those who can afford health insurance and refuse to buy it will be subject to a fine of up to $695, to be assessed by the IRS.
Requiring the IRS to manage such programs distracts it from its primary mission of collecting tax revenue, says Donald Williamson, professor of taxation at American University’s Kogod Tax Center. “The IRS is the IRS, not the penalty assessment bureau for people who don’t have health insurance.”
President Obama has proposed a budget of $12.76 billion for the IRS in fiscal 2013, up nearly $945 million from the current fiscal year. While that’s not enough to rebuild the IRS workforce to mid-1990s levels, “it would be a giant step in the right direction,” says Colleen Kelley, president of the NTEU.
Still, increasing the IRS’ budget won’t address a more fundamental problem, says Mark Robyn, an economist for the Tax Foundation, a non-partisan organization that supports low taxes. Currently, he says, the tax code is so complex that average taxpayers can’t prepare their returns without professional help.
Olson agrees that the tax code is too complex, but says that’s no excuse for poor service. If individuals with questions about their taxes can’t get help from the IRS, she says, “you’re really harming taxpayer trust.”
Mary Wright, an IRS employee and president of the NTEU chapter in Colorado, agrees. “Most people want to be compliant,” she says. “But the tax code is complicated, and they need help.”