So How Are Things At The IRS?

If you’re associated with the IRS in any way right now you’re probably in turmoil. The agency as a whole is the subject of a number of controversies. Congress is conducting an extensive review of the budget allocation to the IRS for the coming fiscal year. The prior year funding was reduced. ObamaCare enforcement is an added (HUGE) responsibility. It’s like the perfect storm and the IRS is in the middle of it all.

National Taxpayer Advocate Nina E. Olson today released her statutorily mandated mid-year report to Congress that identifies the priority issues the Taxpayer Advocate Service (TAS) will address during the upcoming fiscal year. Most of these reports in the past have focused on areas to clarify or specific topics to address. While this report contains some of the same type of information, a major theme of the report is the agency’s inability to meet taxpayer needs for service because of the severe limits on its resources.

“Today, the IRS is an institution in crisis,” Olson wrote. “In my view, however, the real crisis is not the one generating headlines. The real crisis facing the IRS — and therefore taxpayers — is a radically transformed mission coupled with inadequate funding to accomplish that mission. As a consequence of this crisis, the IRS gives limited consideration to taxpayer rights or fundamental tax administration principles as it struggles to get its job done.”

What does that mean for us as taxpayers? Well, it’s not likely that things will get better if you’re dealing with the IRS. Hold times for phone calls to the IRS have increased from 15-30 minutes on average to 45-60 minutes. Written requests for correction are now taking 60-90 days on a regular basis and in some cases the request isn’t even entered into the IRS tracking system within 30 days. One of the more common IRS responses right now is the letter indicating that an inquiry has been received but that the IRS has been unable to review it due to limited resources.

Audit resources may also be impacted. And while that’s not necessarily a bad thing from a taxpayer standpoint, it will mean that auditors will be under greater pressure to both dispose of audits and recover funds. A recent discussion with a taxpayer revealed that they had conclusive proof that a dependent had lived with them (a lease and a court order) and the examiner still denied the claim. It was a completely illogical response to the information provided because the response was driven by pressure to close the file.

Perhaps clearest of all is the apparent reality that things are not likely to get better for the IRS in the near future. Public sentiment is at an all-time low. Congressional skepticism is rampant. And the actual task at hand (do much more with much less) is not likely to change. As a result, it’s very likely the IRS will continue to cause fear and frustration as it executes its duties.

By: Evan A. Nielsen (Licensed in California)

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