For tax preparers, taxpayers, and others frustrated by long wait times on the phone for Internal Revenue Service (IRS) assistance with tax questions, IRS Commissioner John Koskinen has a message: Call your member of Congress.
The reduced funding for the IRS – cut 7 percent in FY 2014 at the same time the IRS was forced to implement tax provisions of the Affordable Care Act while 7 million more taxpayers filed returns – is “the biggest challenge facing the IRS” according to Koskinen.
This was the overriding theme of Koskinen’s remarks as he keynoted the National Society of Accountants (NSA) 69th Annual Meeting on August 21, 2014 at the Hyatt Regency Inner Harbor in Baltimore, Maryland.
“People don’t vote for me – they vote for members of Congress,” Koskinen declared. “Congress needs to hear and understand the impact of the funding cuts. As I tell people on Capitol Hill, we are the only agency still operating at the post-sequester level.”
Koskinen drew on his private-sector experience to point out the fallacy of reducing funding for the major revenue-generating function of the U.S. government at a time when a revenue shortage continues for force budget cuts. In his view, there is a net revenue benefit to providing full funding for the IRS.
“Congress is starving our revenue-generating operation. If voluntary compliance with the tax code drops by 1 percent, it costs the U.S. government $30 billion per year,” he explained. “The IRS annual budget is only $11 billion per year.
Koskinen applauded NSA for writing a letter to the U,S, House of Representatives Appropriations Committee earlier this year that strongly opposed IRS funding cuts and pointed out how these cuts punish American taxpayers.
The IRS was forced to cut 5,200 call center employees because of budget cuts, and Koskinen warned that wait times for phone service will increase through the rest of the year because of a lack of staff.
His message to Congress is, “You cannot continue to reduce our resources and ask us to do more things. The blind belief in Congress that they can continue to cut funding and we will just become more efficient is not the case. We are becoming more efficient but there is a limit. Eventually the effects will show up. We are no longer going to pretend that cutting funding makes no difference.”
Koskinen said that the IRS will “play the hand we are dealt” when it comes to funding, but added, “I will tell you what we can do with the funding we have but I will also tell you what we can’t do.”
While IRS budget cuts may have been driven partially by outrage over the tax scandal involving audits of tax returns from certain tax-exempt organizations last year, Koskinen was emphatic that “this was a mistake that should never happen again. My job is to make sure the public knows that.”
Late Tax Law Changes
He also noted that when Congress passes tax law changes late in the year it creates huge challenges for the IRS and taxpayers. “We think it is unlikely that the tax provision extender package will pass before the mid-term elections but we hope it will pass soon after that,” he said. “Congress needs to understand that the later these are passed and the more complicated they are, the more challenging it is for taxpayers to file accurate returns on time.”
The IRS has to amend its tax forms to reflect these changes and then deliver them to tax preparers, tax software companies, and taxpayers. This takes time and can effectively shorten the tax filing season. “We will keep you informed as best we can,” he said.
Voluntary Continuing Education for Tax Preparers
Koskinen spoke about the IRS voluntary education program the agency plans to implement by the beginning of the 2015 tax filing season.
The program is part of a broader effort the IRS began a few years ago to achieve a minimum level of competency across the federal tax return preparer community. Koskinen believes that taxpayers need to be confident that the preparer they hire knows enough about taxes to help them with their federal income tax returns.
“It is important to keep the momentum going for the education of tax preparers but it is only an interim step,” he said of the education process.
IRS Progress on Key Issues
Koskinen highlighted the IRS “Taxpayer Bill of Rights,” which contains 10 fundamental rights that taxpayers have and is now featured prominently on the IRS website home page.
He also spoke about ongoing efforts to flag tax returns that may be tied to identify theft. “We rejected 5.7 million suspicious returns last year that may have been tied to identity theft,” he noted.
To catch tax evaders, Koskinen noted, “We have made great strides in getting people to disclose foreign accounts. Congress has given us an important new tool – the Foreign Account Tax Compliance Act. The average taxpayer needs to know that the tax system is fair and that the very wealthy cannot hide part of their income in foreign accounts.”
For more information about NSA, visit www.nsacct.org.
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NSA and its affiliates represent more than 30,000 members who provide accounting, auditing, tax preparation, financial and estate planning, and management services to approximately 19 million individuals and business clients. Most members are sole practitioners or partners in small- to medium- size accounting firms. NSA protects the public by requiring its members to adhere to a strict code of ethics. For more information, visitwww.nsacct.org.