Taxpayer Advocate says taxpayers will pay if IRS budget is cut

July 1, 2011

Internal Revenue Service Commissioner Douglas Shulman last month warned Congress that budget cuts to his agency could lead to a bigger federal deficit.

The math is simple. If the IRS doesn't have enough money to enforce tax laws and collect revenue, the U.S. Treasury is the big loser.

Now the National Taxpayer Advocate Nina E. Olson has followed up Shulman's alarm, telling lawmakers that American taxpayers also will big losers if the IRS doesn't get sufficient money to do all its myriad jobs.

"In recent years, the IRS has been given more and more tasks, but it is not receiving the resources it needs to fulfill these tasks without cutting corners," Nina the report says. "And when the IRS cuts corners, taxpayers can be harmed and revenue collection may suffer."

Follow-up friday iconOlson's assessment, which is this week's Follow-up Friday item, is part of her mandated midyear report to Capitol Hill.

"The last few years have been particularly challenging for taxpayers and the IRS, as the recently enacted Economic Stimulus Payments, First-Time Homebuyer Credit, and Making Work Pay Credit, among other tax benefits, have proven complex to claim or substantiate and have led to a significant increase in taxpayer inquiries and problems," Olson wrote in her Fiscal Year 2012 Objectives Report to Congress.

At the same time, she noted, the IRS' ability to respond to taxpayer phone calls and correspondence has declined. 

On the funding side, Olson told Congress that "in recent years, the IRS has been given more and more tasks, but it is not receiving the resources it needs to fulfill these tasks without cutting corners. And when the IRS cuts corners, taxpayers can be harmed and revenue collection may suffer."

In previous reports, Olson has recommended that the IRS generally be exempt from budget caps or reductions. That's never going to happen.

Budget constraints are real. Every federal agency, including the one charged with bringing in the money that all of Uncle Sam's departments use, must bear some cuts.

Plus the IRS is a favorite scapegoat for politicians as well as taxpayers. It wouldn't serve tax bashers' purposes if they cut the IRS any slack on the funding front.

Taxpayer Advocate FY12 report June 2011 But Olson keeps trying to get the IRS money she says it needs to better serve U.S. taxpayers.

"Despite differing views about the appropriate level of taxation, there is widespread agreement that taxes that are due and owing under the law should be collected," Olson told Congress.

"Spending cuts mean the IRS will not have the resources to ensure that all taxpayers pay their fair share, thereby effectively forcing compliant taxpayers to pay more to subsidize noncompliance by others."

"Moreover, the IRS will not have the ability to meet the service needs of the taxpayers who are paying our nation’s bills."

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Those procrastinating filers aren’t a problem. In fact, the IRS appreciates taxpayers who take time to fill out their 1040 forms correctly. It also is grateful that tax submissions are spread out a bit, especially now that the IRS is a leaner agency. Processing returns is easier when they arrive throughout the year instead of in massive bunches.

But enough about Uncle Sam’s tax collection issues. The focus now is on all y’all who filed for extensions, giving you another six months to complete your return. Since your new mid-October due date will be here before you know it, let’s get started now on meeting it.

The ol’ blog is here to help you finish up your extended Form 1040. You can start with January’s tax tips page, which has links to the rest of the year’s tips by-month collections. You also can peruse various tax categories for more tailored advice by clicking on the More Tax Posts drop-down menu at the top of this (and every) page.

And to make sure you don’t miss your new filing deadline, the count-down clock below will let you know just how much time you to file by Oct. 15. At the latest.e. (Note: I’m in the Central Time Zone, so adjust accordingly for where you live.)

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