IRS’ Koskinen offers words of wisdom, wishlist, and warning as he leaves tax agency

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It took John Koskinen 15 seconds to decide to take the job of Internal Revenue Service commissioner. Four years, dozens of congressional hearings, and one impeachment attempt later, it would still only take 15 seconds for Koskinen to take the job.

“It’s been an ‘interesting’ four years,” Koskinen told reporters Monday, during his final press conference as IRS chief. “Perhaps more interesting than some of us might have expected, including yours truly.”

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Koskinen spoke candidly during the hour-long call, touting his proudest accomplishments, sharing a wishlist for his successor, and offering a warning for congressional appropriators.

“As I leave town, I want people to understand there are ramifications to under-funding the agency, and if the agency fails and people are looking for fault, it’ll be the fault of the Congress that in those days delighted in talking about punishing the IRS,” Koskinen said. “When I got here, I said, ‘You’re not punishing the IRS, you’re punishing taxpayers and supporting tax cheats.’ And the responsibility has to be clear. I tried to make it clear both when I warned them, I tried to make it clear when I testified when they were complaining how could we have a system where the level [of answered phone calls] was 37 percent. And I said I told you about it, and it was simply a matter that we had 40,000 fewer people we hired during the filing season, and the reason we did that was not because we didn’t like taxpayers, we did it because we didn’t have the funding. It was the only way we could get through the year without closing the agency. So I feel very strongly it is a question of fault, it is a question of responsibility, and the responsibility is upon the people who control the budget. If you think you can run this agency with 20,000 fewer people with 10 million more taxpayers and all the responsibilities we have, you live in a different world than I do.”

Don’t take it personally

The Associated Press reported David Kautter will serve as acting IRS commissioner effective Nov. 13. Kautter currently serves as the assistant secretary of the U.S. Treasury for Tax Policy.

Koskinen took over the role as IRS commissioner in 2013 after former IRS official Lois Lerner retired. The IRS in 2013 admitted it had targeted some conservative groups filing for tax-exempt status.

Along with the IRS, Koskinen has worked for other organizations “under stress,” like mortgage company Freddie Mac.

“Survival is its own reward,” Koskinen said. “I have been through a lot. I think the secret of all this is not to take it personally. I understand the politics, and as I’ve said I respect people who go into elected politics, it’s a tough business. Even the people who’ve growled at me the most, I still respect the fact that they’ve devoted their careers to in fact getting into that position. So some hearings are for public affect, not all are necessarily designed to elicit information and educate members. Then you take that as part of the system. My concern about the personal attacks is that it discourages people in the private sector who might have an implication to do public service from actually doing it.”

Koskinen said he hopes to take the “lightning rod” away from the agency as he steps down, and that the new commissioner — nominated by the administration — will have credibility on Capitol Hill, and people will look forward with the IRS, not backward.

Not whether, when

Koskinen said what the agency will continue to face as it looks ahead is a shrinking budget and increased threats to taxpayer information.

The IRS is about $900 million below its 2010 funding levels. President Donald Trump proposed a $10.975 billion budget, a cut of $260 million from the agency’s 2017 budget.

“My concern now as I leave is that if the IRS budget continues to be cut, tax administration will fail in one of two ways,” Koskinen said. “And this is not a question of whether, it’s simply a question of when.”

The first is IRS’ IT systems. Koskinen said about 64 percent of the agency’s hardware is aged and past warranty. About 22 percent of the software is two or more releases behind the industry standard.

“I’m concerned that the potential for a catastrophic system failure is increasing as our infrastructure continues to age,” Koskinen said. “If this failure were to occur during the filing season, we could be looking at lengthy interruption in processing returns and issuing refunds. This could have a devastating effect on more than 100 million taxpayers waiting on their refunds as well as the nation’s economy which sees some $275 billion in refunds each winter and spring.”

Koskinen said his other concern is ensuring tax compliance. Since 2010, IRS has lost about 20,000 full-time employees, and of those losses, about 7,300 were enforcement personnel.

“We don’t have enough people to perform all the audits we think are necessary,” Koskinen said. “That continues to show up in our enforcement statistics. We audited just under 935,000 individual income tax returns in fiscal 2017. That’s the lowest number in 14 years.”

Important and good work

Despite the agency’s uphill battle, IRS has made significant steps, Koskinen said. The outgoing commissioner pointed to the fourth successful filing season in a row, a decline in the number of identity theft reports, increased digital services and improved customer service, and successfully implementing legislative mandates even without funding.

“Looking back over the last four years, I’m delighted with what the agency has accomplished in many areas, even with all the constraints and challenges we faced,” Koskinen said. “That progress is a result of a lot of very important and good work by the career employees of the IRS. My job has just been to try and provide appropriate structure and support for the work they do.”