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IRS ripped at hearing over service cuts to taxpayers

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The House Ways & Means Committee slammed the Internal Revenue Service on Wednesday for “deliberately” cutting $134 million in funding for customer service to pay for employee bonuses and union activity, which lead to 16 million fewer taxpayers receiving IRS assistance in the 2015 filing season.

In its report titled, “Doing Less With Less: IRS’ Spending Decisions Harm Taxpayers,” the tax-writing committee acknowledges that while Congress has chopped the IRS’s budget over the past few years in part due to IRS “waste and misconduct,” the IRS is misallocating its resources away from assisting taxpayers.

But IRS Commissioner John Koskinen countered in his testimony during a Wednesday Ways & Means Oversight Subcommittee hearing on the 2015 tax filing season that taxpayers’ poor customer service experience was directly related to congressional cuts to the IRS’ budget.

Since peaking in 2010, the IRS’ budget has been cut by $1.2 billion, with the “intent” of the cuts designed “to force the IRS to manage its resources more effectively and immediately stop inappropriate activities,” the report says.

The inappropriate activities in question, according to the report, included “extravagant” employee conferences, one of which cost $4.1 million; a “Star Trek” themed training video that cost $60,000 to produce; and the targeting of tea party-aligned groups for extra scrutiny.

However, the GOP-controlled committee’s report states that the IRS made a 73 percent reduction in user fees allocated to customer service, and a 6 percent decrease in total funding for taxpayer assistance, while awarding $60 million in bonuses to its employees “at a time when the IRS did not yet know what its budget would be for fiscal year 2015.”

Further, the report states that the amount of time IRS employees spent on union activity would allow for more than 2 million additional taxpayer-assistance calls.

In his opening statements at the Ways & Means Oversight hearing, Chairman Peter Roskam, R-Ill., said that last year the IRS spent $183 million of its user fees (collected for various IRS services), or 44 percent of the total user fee account, on taxpayer services. 

Yet this year, he said, the IRS “only plans to spend $49 million in user fees on taxpayer services. That’s $134 million less than last year, a 73 percent cut.”

If the IRS had used that $134 million to answer calls for assistance, he continued, the money “could have helped 16 million people.”

The report also states that if the IRS contracted with private debt collectors it could increase its own enforcement budget by more than $100 million every year.

Koskinen was questioned at the hearing on why the IRS wasn’t using private debt collectors.

His reponse: “We tried that twice and we didn’t make any money at it; [using private debt collectors] turned out to not be a productive enterprise.”

While the 2015 filing season commencing on schedule, it “was a major accomplishment, given the challenges we faced,” Koskinen told lawmakers. Along with the IRS’ “normal work to get ready for the filing season, additional preparation was needed.”

The IRS also had preparation tasks related to the Affordable Care Act (ACA) and the Foreign Account Tax Compliance Act (FATCA).

While “initial indications” show that tax return processing went smoothly, Koskinen said, the IRS’s “level of customer service this filing season has been unacceptably low, both in person and on the phone, despite the best efforts of our employees.”

The low service levels, he argued, “were the result of the budget cuts we have had to absorb,” as funding for the agency has been reduced by $1.2 billion over the last five years, dropping to $10.9 billion in FY2015. The IRS is now at its lowest level of funding since 2008.

Koskinen also stated during the hearing that due to budget cuts, the IRS now has 5,000 fewer enforcement personnel.

President Barack Obama’s fiscal 2016 budget provides $12.93 billion for the IRS, which includes $12.3 billion in base discretionary resources, an increase of $1.3 billion from fiscal 2015. Koskinen said the budget boost would allow the IRS to make “strategic investments to continue modernizing our systems, improving service to taxpayers, and reduce the deficit through more effective enforcement and administration of tax laws.”