IRS Achieved Record Collections Despite Reduced Staff

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Everybody thought that the IRS would be incapable of collecting as much tax revenue as years past with a reduced work force.  The loudest voices crying for a bigger tax collection budget came from within the IRS and from the Taxpayer Advocate.  The prevailing thought was that the IRS was just going to have to do more with less.  And apparently that’s just what they did.

According to a report released today by the Treasury Inspector General for Tax Administration (TIGTA), in 2013 the IRS increased total gross collections by 13 percent compared to 2012.  The IRS collected an unfathomable $2.9 trillion in fiscal year 2013, including $50.2 billion from enforced collections such as wage garnishments, bank levies, and seizures.  Interestingly these numbers were achieved with fewer examinations, fewer tax liens, and fewer levies & seizures.  It is difficult to tell what all this means.  Maybe the IRS is less likely to nail people for making mistakes on their taxes, filing late, and paying late.  But I think it is also safe to say that when they do catch you, they really sink their teeth in.  Maybe you think you’re safe because the IRS has bigger fish to fry, but if this report is any indication, I think the IRS is casting smaller nets and throwing fewer back.

IRS Collecting Less Revenue "By Force" . . . For Now

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According to the latest TIGTA report, enforcement revenue is down at the IRS.  Enforcement revenue is the money collected through enforced collection activities rather than through voluntary compliance.  Enforcement revenue is down because the IRS has decreased the overall number of enforced collection actions (i.e., lien, wage garnishment, bank levy, property seizure).  The number of enforced collection actions is down because the number of IRS enforcement personnel is down.  And the number of enforcement personnel is down because the funding that the IRS used to receive for these positions is down as well.  According to TIGTA:

The 13 percent reduction in enforcement revenue correlates to the 14 percent reduction in the number of enforcement personnel … since Fiscal Year 2010, approximately 8,000 full-time IRS positions have been lost—about 5,000 from front-line enforcement personnel.

But who are considered enforcement personnel?  Auditors?  Revenue Officers?  Call center personnel?  All of the above?  One news source suggests that these 5,000 lost “enforcement” positions are auditor positions, but I would take it to mean something broader than that.  The TIGTA report does not specify.  I think it matters, because 5,000 lost auditor or revenue officer positions is rather significant, and could realistically be responsible for the 13 percent drop in enforcement income.  However, 5,000 fewer Automated Collection Department phone operators would result in extended hold times, but probably not a drastic drop in enforcement revenue.

Maybe 13 percent is not enough to make an appreciable difference from the perspective of a tax practitioner.  The IRS is supposedly issuing fewer liens and levies, but I sure haven’t seen this to be the case.  And it is certainly not something we can count on continuing for too long.

IRS May have to Make Do with Less in 2012

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In difficult financial times, individuals are forced to take a good hard look at every single expense to make sure it is necessary.  And in the federal government, it’s no different.  Lawmakers are looking across the board at every service, program, committee, and agency.  Expenses that cannot be eliminated will be reduced as much as possible, . . . and rightly so.  Right?

What about expenses that generate revenue?  Should there be an exception?  IRS Commissioner Douglas Shulman believes that not all government expenses are created equal.  He believes that his agency should be treated differently.

The House Appropriations Committee has recently approved proposed legislation that would cut funding to the Internal Revenue Service by $600 million for fiscal year 2012 and Shulman is up in arms about it.  He has some bold words:

[T]hese budget cuts will result in a direct increase to the nation’s deficit.

~ Douglas Shulman, Commissioner of the IRS

Nice soundbite at least.  Here’s what he thinks will happen if we cut funding to the IRS.

  1. reduction in service
  2. reduction in revenue collected
  3. negative impact on voluntary compliance for years to come

As for a potential “reduction in service,” Shulman says that, in some instances (if the budget cuts are approved), it would take 5 months for the IRS to respond to taxpayers’ written inquiries and only half of those telephoning the agency would get through.  Resolution of back taxes would be slowed significantly.  I don’t know, maybe Shulman should welcome these cuts — it would allow his agency to continue providing low quality service, except now they would have a good excuse.  Read Shulman’s full letter here.