The complexity of the current U.S. tax code, running tens of thousands of pages long, often leaves taxpayers confused and in need of assistance when filing their annual tax returns. Many turn to private accountants and financial advisors to provide expertise, the annual costs of which are estimated to exceed $200 billion. Others turn to the tax collectors themselves for support, but have struggled to receive adequate assistance in recent years. In her annual report to Congress, National Taxpayer Advocate Nina Olson found that while support provided by the Internal Revenue Service (IRS) has improved modestly since last year, these improvements in taxpayer services may only be temporary.
The 2015 tax season was “by far the worst in memory” for taxpayers who sought assistance from the IRS, according to Olson’s report last year. In response to these shortcomings, Congress appropriated an additional $290 million for the agency this year, intended primarily to address its deficiencies in taxpayer services. The increased funding appears to have at least partially achieved its purpose; the agency’s telephone assistance improved dramatically, posting its best level of service and lowest average hold time since 2011. Specifically, this year the number of answered calls almost doubled from 2015, while the average hold time was halved, declining from 23 minutes to 11 minutes.
A one-time funding boost has not been enough to reverse half a decade of budget cuts and increased responsibilities.
Even so, a relatively small, one-time funding boost in support of IRS taxpayer services has not been enough to reverse much of their deterioration after half a decade of budget cuts and increased responsibilities. As Olson notes, many of the problems that taxpayers encounter in dealing with the agency are the result of its inadequate resources and accompanying cost-saving efforts.
In recent years, the IRS eliminated the preparation of tax returns for low-income, disabled, and elderly taxpayers who request assistance. The agency has also placed restrictions on the assistance that its employees are allowed to render for tax-law inquiries—only those questions deemed “basic” can be answered during filing season, and none can be answered outside of filing season.
Additionally, by the end of this year, the IRS plans to almost entirely eliminate walk-in services at its 376 Taxpayer Assistance Centers (TACs) nationwide and instead require advance appointments. Although this change could reduce costs by eliminating superfluous visits to TACs, it might also be a source of inconvenience, especially for taxpayers in urgent need of assistance; a 2015 appointment-only pilot program found that more than one-fifth of participants had appointment wait times between 13 and 41 days, and 5 percent had wait times exceeding 41 days.
Finally, the agency has scaled back the availability of free hard copies of tax forms and publications. For instance, the IRS discontinued making available free printed copies of its popular Publication 17—which provides information about common tax situations and references to other helpful resources—so non-electronic versions now cost $23.
While some of these cutbacks come as steps in the agency’s “Future State” plan, which aims to transition the agency into cost-saving online taxpayer services, adequate interim funding would help to ensure that the transition does not detract from current taxpayer services. For example, Olson’s report indicates that during the 2016 tax season, the IRS prioritized improved telephone assistance at the expense of other taxpayer services, such as written correspondence, because its staffing levels were unable to meet all service demands simultaneously.
This staff shortage is especially problematic given the increased compliance support the IRS is supposed to provide as part of the Affordable Care Act. The IRS is responsible for both helping individuals claim new tax credits that subsidize insurance premiums and collecting penalties from those who do not purchase health coverage either themselves or through their employers. Unfortunately, the agency has been hampered in this work for a number of reasons, including poor reporting of data by third parties (such as the ACA marketplaces and private insurers), that have further complicated their objectives.
In this year’s report, Olson contends that, “to a significant degree, the IRS’s shortcomings are budget-driven.” The reality is the agency can only do so much given its great demands and resource constraints. Although the improvement made by the IRS in its taxpayer services over last year is notable, the overall trend of declining funding and reducing services means the shortcomings outlined in the report are likely to continue, risking errors, non-compliance, and inequitable access to tax assistance.
Eric Ward contributed to this post.
KEYWORDS: INTERNAL REVENUE SERVICE