Impact of IRS Budget Cuts

Post Date: 1/21/15
Last Updated: 1/21/15


Cross References
- IRS Commissioner John, A. Koskinen

The IRS Commissioner sent IRS employees an email detailing the effects of recent budget cuts. Congress approved a $10.9 billion budget for the IRS for fiscal year 2015, which is a cut of $346 million from the previous fiscal year. The budget is the lowest level since 2008, and the lowest since 1998 when inflation is considered. To absorb the budget cuts, the Commissioner gave the following examples of what to expect.

Enforcement cuts of more than $160 million. Impact:
- Fewer audit and collection cases. Reduced staffing in enforcement will result in at least 46,000 fewer individual and business audit closures and more than 280,000 fewer Automated Collection System and Field Collection case closures.
- As a result of the hiring freeze, the IRS will lose about 1,800 enforcement personnel through attrition during FY 2015.
- The reduced enforcement staffing for just FY 2015 means the government will lose at least $2 billion in revenue that otherwise would have been collected.

Cuts in overtime and temporary staff hours by more than $180 million. Impact:
- Delays in refunds for some taxpayers. People who file paper tax returns could wait an extra week, or possibly longer, to see their refund. Taxpayers with errors or questions on their returns that require additional manual review will also face delays.
- Increasing correspondence inventories. There will be growing inventories in Accounts Management, and taxpayer correspondence will face lengthy delays.
- Taxpayer services diminished further over the phone and in person. The IRS anticipates an even lower level of telephone service than before, which raises the real possibility that fewer than half of taxpayers trying to call will actually reach an IRS employee on the phone. During FY 2014, only 64% were able to get through. Those who do reach an IRS employee will face extended wait times.

Delays to critical IT investments of more than $200 million. This will impact taxpayer service and cost-efficiency efforts as well as reduce outside contractor support for critical projects.
- New taxpayer protections against identity theft will be delayed.
- The Taxpayer Advocate Service won’t be able to obtain a new case management system to oversee taxpayer hardship cases.
- Aging IT systems will not be replaced, increasing the risk of downtime that affects taxpayer services and the ability for IRS employees to work effectively.
- Not able to invest upfront money to gain future operational savings, such as moving to a shared cloud infrastructure and reducing data center space.

Extending the hiring freeze through FY 2015. As a result of the hiring freeze and assuming normal attrition rates, the IRS expects to lose between 3,000 and 4,000 additional full-time employees. The total reduction in full-time staffing between FY 2010 and FY 2015 is expected to be between 16,000 and 17,000.

Even with all of these reductions, the IRS still faces a remaining budget shortfall. This means the IRS must plan for the possibility of a shutdown of IRS operations for two days later this fiscal year, which will involve furloughing employees on those days.
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