IRS warns weaker enforcement, slow service would follow cuts

The Internal Revenue Service is reducing spending in anticipation of budget cuts for this fiscal year, commissioner Douglas Shulman wrote in a letter to lawmakers last week. He warned of a “noticeable degradation” of taxpayer services and enforcement if Congress follows through on a plan to cut about $500 million from the agency's budget for fiscal 2012. If that happened, half of the taxpayers trying to reach the agency either would get busy signals or hang up in frustration, and responses to taxpayer letters would be delayed as much as five months, Mr. Shulman wrote. And audits and efforts to collect unpaid taxes would drop by between 5% and 8%, he wrote. “These budget cuts will result in a direct increase to the nation's deficit,” Mr. Shulman wrote to the chairmen of the congressional committees that oversee the tax code and the IRS budget. He estimated the revenue loss at $4 billion for this year. For fiscal 2011, which ended Sept. 30, the IRS received $12.1 billion. President Barack Obama asked for funding of $13.3 billion in his 2012 budget proposal. The House Appropriations Committee approved a bill with an $11.5 billion level for the IRS, and the companion bill in the Senate set the budget at $11.7 billion.

NOT MUCH ROOM

Neither of those bills has reached Mr. Obama's desk, and Congress hasn't set final spending levels for the 2012 fiscal year, which began Oct. 1. Lawmakers passed a temporary spending plan that expires Nov. 18. There isn't much room for change in those numbers, because overall government spending this year is constrained by the August agreement that included an increase in the federal debt ceiling. Mr. Shulman wrote that the depth of the cuts being considered prompted him to start reducing the agency's spending before a 2012 budget has been passed. Waiting could make the cuts even deeper, he wrote. “If we did, we would not have enough time left in the year to make the spending cuts that could be required,” Mr. Shulman wrote. The letter gave no additional detail about what cuts are being implemented. It noted that the cuts “would mean that front-line IRS staffing levels must be substantially reduced.” Mr. Shulman noted in the letter that Congress has given the IRS additional responsibilities, such as administering a program that requires reporting on credit card payments. At the end of fiscal 2010, the IRS had 94,346 employees, according to the agency's website. About 3,000 to 4,000 positions could be cut, according to Colleen Kelley, president of the National Treasury Employees Union, which represents much of the IRS workforce. “It's so basic,” she said during an Oct. 12 conference call with reporters. “The agency that brings in more money than it spends, why would you not fund it?”