A precipitous decline in taxpayer services occurred this year at the Internal Revenue Service (IRS), due to the over $1 billion in cumulative budget cuts during the past five years. Currently, IRS funding is 17 percent below its 2010 peak, and a new report paints a bleak picture of an agency overwhelmed, with too few resources to emphasize both enforcement and taxpayer assistance. If current trends hold, National Taxpayer Advocate Nina Olson warns that public frustration will continue to mount, which could lead to a decrease in voluntary tax compliance.
According to Olson’s annual report to Congress, this year’s tax season was, “incredibly difficult for taxpayers…particularly in the area of taxpayer service.” On top of budget cuts, the agency was also forced to shoulder additional responsibilities, such as implementing parts of the Affordable Care Act, the Foreign Account Tax Compliance Act, and the tax extenders package. The combination of the two and a shrinking budget topline ultimately led the IRS to shift around $133 million from Taxpayer Services to Operations Support, resulting in a steep decline in taxpayer services:
Telephone Services had its worst year since the adoption of new performance measures in 2001. Just 37 percent of calls routed to human “telephone assistors” were answered, with an average wait time of 23 minutes. In contrast, 71 percent of such calls were answered last year, and the average wait time was around 14 minutes. In addition, “courtesy disconnects”—when the IRS switchboard hangs up on callers due to a system overload—skyrocketed this year to 8.8 million, up from 544,000 in 2014.
Written Correspondence with taxpayers—which includes notices of changes in tax liability, as well as the processing of taxpayer responses—did not suffer to the same extent as telephone services, but performance did slightly decline. The percentage of correspondences processed in a slower than normal time frame rose from 22.7 percent in 2014 to 25.1 percent this year. This is because IRS made a conscious decision to emphasize correspondence over telephone services, as the consequences of failing to process taxpayer written responses can be more significant than neglecting phone services.
Walk-in Services were impacted by several changes that were enacted to Taxpayer Assistance Centers (TAC), the offices where individuals can receive in-person tax assistance. In 2014, IRS limited the types of questions allowed at TACs to “basic” law questions during filing season, and stopped answering any tax law questions after filing season. Furthermore, TACs ended the practice of preparing tax returns for low-income taxpayers, people with disabilities, and older Americans, began closing on Saturdays and Presidents Day, and no longer offered extended hours during the filing season.
On the brighter side, a new pilot program permits taxpayers to book appointments at TACs in advance. Available at 44 locations, this allows for more upfront issue resolution and shorter wait times. Anecdotal evidence suggests that schedulers can often resolve problems via phone, avoiding the trip to the TAC altogether. Evidence also shows, however, that many pilot TACs have stopped assisting drop-ins, allowing them to only pick up forms and make payments.
Tax Forms and Publications were less available this year than in the past because fewer copies were printed and distributed, and deliveries to TACs and were delayed, with some forms not available until halfway through the filing season. Additionally, once a TAC ran out of a form or publication, the office was unable to make further orders. Employees were told not to give out the phone number for ordering tax forms unless a caller specified that they did not have access to an online version, or otherwise pressed the employee about ordering by phone.
The Taxpayer Advocate’s report shows a troubling decline in taxpayer service, largely blaming budget strains in the context of increased agency responsibilities. Ultimately, the U.S. tax system relies upon individuals to understand and comply with the tax laws. If Americans cannot get basic help with questions from the IRS, some may make inadvertent errors, and others may incur the added expense of paid preparation. Either way, taxpayers who are honestly attempting to meet their responsibilities are disadvantaged. At worst, taxpayers unable to obtain government assistance could simply give up on their taxes, requiring the IRS to rely more heavily on enforced compliance.
Jillian Zook contributed to this post.