The National Taxpayer Advocate has confirmed in a new report what the IRS long warned about: Taxpayers can forget about getting help from the agency amid budget cuts and staff shortages.
“For the segment of taxpayers who required help from the IRS, the filing season was by far the worst in memory,” wrote Advocate Nina Olson in a report to Congress.
The shortcomings were obvious to those who sought IRS assistance on foot, by phone or through correspondence, the report said. The 37 percent of callers who actually got through to a customer-service representative waited an average of 23 minutes on hold. That is the worst performance in at least 14 years, the report said.
“This was an extraordinary data breach that has the potential to undermine taxpayer confidence in the security of the IRS’ efforts to move more services online,” the report said.
And yet, it gave the agency credit for covering the basics.
“Under these difficult circumstances, the IRS accomplished a great deal. It received and processed most tax returns in a timely manner, and it issued timely refunds to most taxpayers who were entitled to them,” the report said.
“It is important to note that the IRS must carefully balance limited resources to meet its dual mission of providing taxpayer service and enforcing the tax laws,” the IRS said in a statement. “With 75 percent of our budget being personnel, and one-third of our workforce providing taxpayer service, the continuing cuts to our budget have severely hampered our ability to provide taxpayers with the services they need and deserve.”
Congress has cut the IRS’ budget by about $1.2 billion since 2010. Republican lawmakers remain angry with the agency for allegedly mistreating conservative applicants for tax-exempt status during the 2010 and 2012 elections. In a sign that the rage has not faded, the GOP-led House Appropriations Committee approved a budget of $10.1 billion, about $838 million less than what the IRS has now.
The budget pinch has forced the agency to freeze hiring despite attrition.
“It is disgraceful that Congress has allowed the level of service to taxpayers to fall so low. These dramatic declines are a direct result of severe cuts to the IRS budget,” said Colleen Kelley, president of the National Treasury Employees Union, which represents many IRS workers.
New health law adds to IRS’ burden
The report by the taxpayer advocate noted that taxpayer services suffered just as Americans were faced with new requirements under the health law.
For the first time, taxpayers had to tell the IRS whether they had health insurance the previous year. Millions who received government subsidies to pay for premiums had to report those on their returns.
Through April, about 6.6 million taxpayers had to pay fines because they didn’t have health insurance, the report said. The fines averaged $190.
Researchers identified more than 300,000 taxpayers who overpaid their fines, the report said. Most of these taxpayers didn’t owe fines because their incomes were low enough to qualify for exemptions.
A total of 10.7 million taxpayers claimed they were exempt from the fines.
About 2.6 million families said they received subsidies to help pay for premiums. The subsidies come in the form of tax credits. They averaged $3,000 per tax return, for a total of about $7.7 billion.
Overall, the IRS has done “a commendable job” implementing the initial stages of the health law, despite budget cuts, the report said.
Republicans in Congress adamantly oppose Obama’s health law, so some have been working to starve the IRS of funds just as its role in implementing the law ramps up.
Since the controversy over tax-exempt applicants erupted in 2013, the IRS has streamlined the process of filing for tax-exempt status under section 501(c)(3) of the tax code. In Wednesday’s report, Olson said agents are now approving applications, “often based on insufficient information.”
Last year, the IRS approved 94 percent of applications for 501(c)(3) status, which allows donors to deduct contributions. The number of applications approved — 94,400 — was more than twice as many as the year before.