WASHINGTON — The IRS, pummeled for years by congressional Republicans and funding cuts, faces the challenge of administering the most sweeping overhaul of the U.S. tax code in three decades. But first the beleaguered agency had to get through the current tax-filing season.
The final year under the “old” tax regime, 2017, has to be accounted for by taxpayers in returns by Tuesday. So how did the agency do? Did pencil-chewing taxpayers get their questions answered over the phone? Did early filers get prompt refunds?
The average refund so far? About $2,900.
Acting Internal Revenue Service Commissioner David Kautter is due to report Thursday to the tax-writing Senate Finance Committee. The panel’s chairman, Sen. Orrin Hatch, R-Utah, said attention will be on ensuring the agency “is well staffed and has the technology it needs to serve taxpayers, reduce fraud and keep taxpayer information secure.”
The massive Republican tax-cut legislation was muscled through Congress late last year and now stands as President Donald Trump’s marquee achievement. It took effect Jan. 1, billed as a huge boon for the stressed middle class and a key GOP selling point in the midterm elections this year. The $1.5 trillion package provides generous tax cuts for corporations and the wealthiest Americans, and more modest reductions for middle- and low-income individuals and families.
The tax cuts for corporations are permanent, while those for individuals and families expire in 2026. Nonpartisan tax experts project that the law will bring lower taxes for the great majority of Americans, though not all.
Already taxpayers have seen a tangible result of the new tax law. Millions of working Americans saw bigger paychecks starting early in the year. Companies and payroll service providers — and their computer systems — had to adjust to new withholding tables crafted by the IRS to reflect changes in tax rates for different income levels under the new law.
The tax bill or refunds for the changes won’t come in until 2019. Meanwhile, this filing season by the numbers: Some 73.3 million refunds totaling about $212.3 billion as of March 30, averaging $2,900.
“I haven’t heard about any disasters,” says Howard Gleckman, senior fellow at the Urban Institute. And he gives the IRS credit for doing a good job this season of keeping up with scams.
Still, the numbers that really count are the IRS budget figures. After years of Congress’ cuts, “The IRS doesn’t have remotely enough money to do what it needs to do,” Gleckman said. “There’s going to be huge challenges out there.”
During President Barack Obama’s tenure, Republicans controlling the congressional purse strings accused the IRS of liberal bias and unfair targeting of conservative tax-exempt groups.
This year, with the new tax law looming, Congress was more willing to open its wallet for the IRS and rejected to an extent the Trump administration’s proposed cuts. But it ended up cutting in other areas, with the result that the agency budget is about the same — $11.5 billion — as in recent years.
“The IRS remains mindful of the need to do everything possible to provide taxpayers … with secure, high-quality assistance and services, through every available channel,” Kautter — who does double duty as the assistant Treasury secretary for tax policy — said in testimony Wednesday to a House Appropriations subcommittee.
Sen. Ron Wyden of Oregon, the senior Democrat on the Finance Committee, sounded a warning. “For years the IRS has faced Republican budget cuts that undermine their ability to go after tax cheats. Audits of America’s wealthiest taxpayers have dropped dramatically,” he said in a statement. “Meanwhile, the IRS is implementing a tax law that’s ripe for exploitation. With every high-priced lawyer gaming the system there is a middle-class family stuck with the financial consequence of a shrinking tax base.”
The House tax-writing committee, meanwhile, approved a series of bipartisan bills Wednesday aimed at changing the way the IRS operates. They would, for example, create an independent appeals process to help taxpayers resolve disputes with the agency, bolster programs that provide tax assistance to low-income, elderly, disabled people and immigrants, and crack down on fraud by tax preparer businesses that prey on unwary people. The agency would have to submit a plan for revamping its customer service strategy.
The Ways and Means panel dispatched the legislation to the full House for a vote.