Budget and Staffing Cuts Taking Their Toll on the IRS, John Koskinen Saysby
IRS budget cutbacks and staff shortages are hampering the agency’s ability to respond to the growth of online taxpayer interactions and the increasing threat of organized crime to internet security, IRS Commissioner John Koskinen said earlier this week.
Citing a budget down $900 million from six years ago and 17,000 fewer staffers, “you can’t keep shrinking the agency without jeopardizing its mission,” Koskinen said during the American Institute of CPAs’ National Tax Conference in Washington, DC, on Nov. 15. “We have places where we had eight people doing a job and now we have two. This is at a point that is critical.”
In the event of a major system failure, Koskinen said he doesn’t want to hear “gee, you should have told us.” The IRS system can’t continue the way it is “without raising problems, and taxpayer service is key,” Koskinen added. “The system depends on voluntary compliance.”
As an example, he noted that the agency estimates that $5 billion remains uncollected from tax returns that should be audited, but the IRS lacks the staff to do it.
Koskinen noted that a key issue is balancing the IRS’s growing digitalization with what National Taxpayer Advocate Nina Olson addressed in an earlier talk: Not everyone wants to deal with the agency electronically.
“There are many people who want to talk to us, so there’s a concern that we’ll leave people behind,” he said. “We’re making clear that this is voluntary. We’re trying to meet the demand from people who want to just do it [online]. At the same time, we need to make it clear to everyone that if you want to file a paper return or call someone on the phone, you can.”
That, in turn, raises the ongoing issue of internet security – particularly because of increasing evidence that organized crime groups are taking part in security breaches. It’s about staying ahead of the crooks and not just reacting to them, Koskinen said.
“This is an ongoing battle and not just with criminal entrepreneurs – and all of this started with prisoners – it is organized crime worldwide,” he said. “One group has a billion user IDs and passwords.”
The work on identity theft and refund fraud prevention that was started almost two years ago by the IRS, CEOs of major tax-preparation companies, financial institutions, major credit card companies, software developers, and tax commissioners, known as the “Security Summit,” has branched into seven working groups – and progress is being made, Koskinen said.
The agency’s IT partners can determine the IP address of the computer used to file a return, how long the user was online, and the global location.
Koskinen also noted that filings of identity theft affidavits have decreased by more than 50 percent.
But the agency is concerned about security threats to tax preparers, and a working group to address that is likely.
“We have an initiative to provide information to individual tax preparers and larger groups for system safety,” he said.
“It’s critical to us because it’s part of our future state,” Koskinen continued. “It’s a question of what should the taxpayer experience look like three to five years down the road. The goal there is to make sure that taxpayers at some point can have a secure financial interaction.”
While about 2 million W-2 forms with new identification codes were used this year, that’s expected to expand to 50 million.
“We’re asking tax preparers to put in those additional numbers on the W-2s,” he said. “That allows the legitimate returns to move more quickly. We stopped 4 million returns last year indicating suspicious activity.”
Terry Sheridan is an award-winning journalist who has covered real estate, mortgage finance, health care, insurance, personal finance, and accounting and taxation issues for newspapers, magazines, and websites. A Chicago native and former South Florida resident, she now lives in New England.