Fighting a 1960s-era computer system and declining audit rates, IRS Commissioner, Charles Rossotti, told a House Government Reform subcommittee that the IRS is in need of a budget increase. Today, the agency performs half the audits it did three years ago. The Commissioner says this could threaten the entire tax system.

The IRS is asking for approximately $8.8 billion for the fiscal 2001 year – that’s an increase of $769 million over last year’s budget. Part of that money – $119 million – is slated to update the agency's very outdated computer system. The IRS intends to use some of the budget to hire almost 2,000 people to beef up enforcement of tax laws and improve its taxpayer customer service.

Though there are widespread reports of the IRS’ taxpayer-friendly reforms weakening the agency’s collection effectiveness, more people are needed to collect the more than $231 billion in overdue taxes and penalties.

But on the flip side, the IRS is still collecting a lot. Rossotti estimates that net tax collections should hit $1.6 trillion this year. That money will ride in on some 127 million individual tax returns that are expected – as of April 2, the IRS had already received 70.1 million.