Are budget cuts and Obamacare confusion causing IRS bottleneck?

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    As Tax Day approaches, the Internal Revenue Service has an unusual warnings for taxpayers: Not everyone who calls the IRS help center will be able to reach an agent, which could result in refund delays this year.

    The agency blames budget cuts. But critics say the IRS should blame itself.

    Judy Woodruff sat down recently for this conversation with the IRS commissioner.


    And we are joined by the man in charge, Commissioner John Koskinen of the Internal Revenue Service.

    Welcome to the NewsHour.

  • JOHN Koskinen, Commissioner, IRS:

    Thank you.


    So, let me just start this interview by citing a couple of numbers we have on taxpayers' experiences with the IRS this year.

    We know that, last year, 70 percent of the people who tried to get through with a question were successful. This year, that's down to fewer than 40 percent. The average wait time for taxpayers trying to get through to the IRS with questions shot up from 10 minutes last year to 24 minutes this year.

    What has happened?


    The short answer is that Congress cut our budget and we have fewer people available to answer the phone.


    Flesh that out for us. How much of a budget cut? What does that mean and how many…


    Well, over the last five years, our budget has been cut by $1.2 billion.

    In December of this year, the last $350 million of that cut was provided. We only had nine months left in the year, so we had to take difficult choices across the board. One of them was, 70 percent or more of our budget is personnel. So, had to immediately say we wouldn't hire any new personnel.

    We also had to not hire for as long a period of time as many seasonal workers that we bring in during the tax season, because that's the busiest time of the year. And we didn't hire our couple thousand temporary employees we normally would hire.

    And those are all decisions we knew would have a negative impact on taxpayer services. We had warned the Congress about it, but we had no choice.


    And what has it meant?


    What it's meant is, the people who care most about this are the dedicated IRS employees who are in the call centers and feel great satisfaction whenever they can help a taxpayer answer a question.

    And they're the ones most concerned that we can't provide the taxpayers the service that our employees think they have a right to.


    I want to quote the congressman who is chair of the congressional subcommittee that oversees funding for the agency, Ander — Representative Ander Crenshaw of Florida.

    He said, in referring to past problems that the IRS has had, overspending on conferences, misguided, as they put it, scrutiny of organizations seeking tax-exempt status and so on, he said — quote — "Congress has deliberately lowered the funding for the IRS to a level to make them think twice about what they were doing and why."

    Have you and your colleagues been thinking twice?


    We have thought twice and more so.

    The problems that have been cited oftentimes took place two to five years ago. We have solved them all. We have explained that all to the Congress in great detail. There are some efficiencies when your budget gets cut that you can obtain.

    But we have done that. We save over $200 million a year now in efficiencies we have taken. As I have tried to explain, at some point, when the cuts get to be more severe, you have to basically understand you are going to do less with less. And that's where we are now.


    There's another complaint we're hearing from the other side of the Capitol, from the Senate, Senator Orrin Hatch, among other things.

    As you know, he chairs the Senate Finance Committee. He's been raising questions about whether you and the agency, in his words,are wasting money by paying millions of dollars in bonuses to IRS employees, I think they said 1,100 IRS employees, who owe back taxes or who have other problems.

    How do you answer?


    Well, again, when that problem was raised, we investigated it. And we have set in place policies where, if you are willfully violating your obligation to pay taxes at the IRS, not only are you subject to dismissal, but you no longer will be eligible for any performance award.


    Are people today being paid bonuses if they owe back taxes?



    In other words, we actually monitor everyone in the IRS. Our compliance rate is over 99 percent. The IRS has the highest compliance rate by far of any federal agency or any congressional operation. So, it's a high compliance rate, but the employees understand they have an obligation to pay their taxes. And we monitor each employee.


    Let me ask you about another new wrinkle this year. It has to do with the new health care reform law, kicked in tax penalties for people who don't have health insurance.

    And there are issues with people trying to reconcile their premium tax credits against their income. We're hearing reports that, of the millions of people out there who are affected by this, that many of them are having real problems. They're struggling to figure out their tax issues.

    How is the IRS handling this?


    Well, we spent a year trying to explain to tax preparers and taxpayers as much as we could how the act works. We have had a quarter-of-a-million hits on our Web site.

    We have a special section for ACA that helps out. And from our perspective, the filing season for those people is going well. Last year, 91 percent of people used software. And we work with the software developers and the preparers to make sure that taxpayers could simply provide answers to question, they will never see the forms, as they never do anyway, and that the filing would be straightforward.

    And thus far — we monitor all the calls to see if there are questions coming in that we need to answer where the answers aren't available, and, thus far, from our perspective, things have gone well. I would estimate — or emphasize over 75 percent of people just check a box and say they have coverage.

    So, for the vast majority of people filing, the ACA act has not been a problem at all.


    But for those individuals who may end up not paying the taxes they owe, either because it's a penalty or for some other reason they don't get the taxes they're due, what is the IRS' position when it comes to enforcing this?

    Are you going to go after people? Are you going to provide some leniency because you're strapped for personnel, or what?


    Well, thus far, our experience is, although it's still — and we have a couple of days to go — our experience has been that the people who are affected in the reconciliations, give or take a little, 40 or 50 percent of them are getting an increase in refund because they underestimated the premium they were — advanced premium they were eligible for.

    And the other half that actually are now getting a smaller fund basically are getting smaller refunds. We do not see a large number or any significant number of people who actually are putting in a position of their owing taxes that they can't pay. We have made it clear — the Treasury Department issued a policy, if you can't pay, you should file, but there will be no penalties.

    You will be in fact absolved of any penalty, but you still have to file.


    There is one other thing I want to ask you about.

    And that is the question that is raised by the challenges the IRS is dealing with right now in terms of personnel. And that is auditing. We know that the percentage of returns the IRS audited last year dropped to the lowest it had been in a decade, less than half — or about a half of 1 percent.

    Is this an invitation of people to, frankly, avoid taxes, particularly people who are wealthy, who have all sorts of complicated forms to fill out? How much are you concerned about your ability to audit as many people as you think need to be audited?


    Well, over time, I am concerned.

    Some people have said, when you underfund us and we have 5,000 fewer revenue agents and criminal investigators, it is really a tax cut for tax cheats. And I think everyone, as they pay their taxes, wants to feel it's a fair system and everybody is paying.

    So, if they feel that some people are cheating and getting away for it, that undercuts the voluntary compliance system. On the other hand, I would note that we will do still over a million individual audits this year. And, as I have said, the roulette wheel spins, and you don't want the white ball to land on your number, because we won't be happy.

    It may take us longer to find you, because we have fewer agents. But the longer it takes us, the higher your tax bill will be, because you will owe interest and penalties on what you also didn't pay. So, we think that, while we are concerned about it in the long run, we are telling taxpayers, you still have a pretty good chance of getting caught. And if you get caught consciously trying to avoid your taxes, you should expect that we are not going to be happy.


    So the message is, don't relax just because you see that we're having difficulty with number of people to deal with all these returns?


    That's right.

    And our experience is, the vast majority of Americans take their obligation seriously, are compliant, do the best they can, which is why we're concerned about taxpayer service. We want to help taxpayers as much as we can figure out how much they owe and how to pay it.


    Only a couple of more days to go.

    John Koskinen, commissioner of the IRS, thank you very much.


    My pleasure.

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