Speaking November 3 at the AICPA National Tax Conference, IRS Commissioner John Koskinen said that, if Congress increased the IRS’s fiscal year (FY) 2016 budget, his top priority would be to improve taxpayer service. He added that the IRS would need $300 million to restore its telephone response service to the 70-percent level from its current level of 40 percent. Service will get worse if there are budget cuts, and will not improve if the budget is the same, the commissioner said.
If Congress provided increased funding, Koskinen noted that other priorities would be to: upgrade IRS systems; ward off stolen identity refund fraud; and invest in information technology security. Koskinen said that the Service has the most attractive database to information thieves, with files on 170-million taxpayers. The IRS information systems are frequently attacked and must withstand millions of attempts to steal information, he added.
Koskinen was asked about wait times for taxpayers and practitioners calling in to the IRS. Callers are on hold for two hours and then are automatically disconnected (which the phone company calls a courtesy disconnect). Koskinen said that half of the calls to the IRS are repeat calls from the same people; answering more calls would reduce repeaters and the demands on the phone system. One approach for improving the system would be “virtual holds,” where the IRS gets the caller’s phone number and returns the call in the order received. It would cost $45 million to update the IRS’s phone system, and Koskinen has asked Congress for additional funds to accomplish this. The alternative would be funding to hire more people, so that wait times are reduced and courtesy disconnects are avoided.
Compliance Performance Declines
In addition to taxpayer service and information technology, Koskinen was also concerned about the impact of budget cuts on compliance. He said the IRS has lost 15,000 employees since 2010, including 5,000 in compliance (revenue agents, revenue officer, and Criminal Investigation staff). Total audits of individuals have dropped 22 percent, or 300,000 audits, from 2010 to 2015. There has also been a long-standing decline in audit revenue, from an average of $14.7 billion in the period 2005 to 2010, to an average of $10.5 billion for the period 2011 to 2015.
Koskinen said that the IRS budget forgoes billions of dollars in lost revenue to save hundreds of millions of dollars in budget costs. He reiterated that investing $1 in the IRS will generate a return of $4. He has discussed this ratio with Congress, and no one has disagreed with it, but Congress continues to make cuts in the IRS budget.
The IRS is now preparing for the 2016 filing season, according to Koskinen. The IRS will face several challenges. One is the need to implement provisions of the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) that took effect in 2015, such as the employer mandate, and late tax legislation, such as the extenders provisions, which creates uncertainty for the IRS and practitioners, as well as taxpayers. Since it is already November, any new legislation is going to be late, he said. He urged Congress to act on the extenders provisions in November. If Congress does not act until December, the IRS may need to postpone the start of filing season, he said.
Other IRS priorities include identity theft and stolen identity refund fraud, Koskinen said. The IRS is partnering with industry on identity theft and is breaking new ground in taking precautions to protect against it. Taxpayers can expect to see more protections, he added, including improving authentication of identity on the front end, and obtaining more matching data so that fraud filters are more effective at identifying and stopping false returns. Nevertheless, the IRS needs to do more, and it will, Koskinen pledged.
By Brant Goldwyn, Wolters Kluwer News Staff