Federal Daily News
IRS underfunding hobbles agency, report says
The biggest problem at the Internal Revenue Service? According to an annual report the National Taxpayer Advocate has just submitted to Congress, the answer is insufficient funding.
“The overriding challenge facing the IRS is that its workload has grown significantly in recent years, while its funding is being cut,” National Taxpayer Advocate Nina E. Olson stated in a press release detailing the report. “This is causing the IRS to resort to shortcuts that undermine fundamental taxpayer rights and harm taxpayers—and at the same time reduces the IRS’s ability to deliver on its core mission of raising revenue.” Olson heads up the Taxpayer Advocate Service, an independent organization within the IRS charged with protecting the interests of taxpayers.
The lack of funding also has a big impact on taxpayers. According to Olson, at IRS's current funding level, the agency cannot fulfill its mandate to collect revenues due to the government—forcing taxpayers to shoulder the liability for the amounts that are owed but not collected.
Tax-gap estimates for 2006 released by the IRS last week indicated that the agency’s inability to collect $385 billion in taxes that year generated a “noncompliance surtax” of almost $3,400 per U.S household, according to the release.
A big reason for the agency’s underfunding, Olson said, is that Congress does not take into account the fact that the IRS collects about $200 for each $1 appropriated to fund it.
Colleen Kelley, president of the National Treasury Employees Union, which represents IRS employees, said the report confirms the union’s position that “funding the IRS is not a cost; it is an investment that pays significant dividends for our country.”
NTEU has long argued that the IRS is underfunded and understaffed, even as the agency’s workload grows and the tax code becomes more complex.
Kelley, who worked for 14 years as an IRS revenue agent, said the agency’s return on investment “sharply underscores the reality that IRS employees are best-positioned and best-trained to do the revenue collection work of America.”
But with growing budgetary pressures weighing on the agency, the situation does not look promising. Federal News Radio reported today that the IRS plans to trim its workforce by offering buyouts or early retirements to as many as 400 employees.