IRS Commissioner Warns of Budget Cut Effects

From the IRS

IRS Commissioner John Koskinen issued a message to IRS employees in January outlining the steps the Service will have to take to deal with the budget cuts Congress enacted late last year, giving the IRS $10.9 billion in funding, a reduction of $346 million from the previous fiscal year.

“There is no way around the severity of these budget cuts without taking some difficult steps,” Koskinen said. Among the steps announced was a possible furlough of IRS employees and a shutdown of IRS operations for two days later this fiscal year. The commissioner did not announce details, but he called shutting the agency “a last resort” and said the goal would be to “minimize disruption to employees and our operations as well as taxpayers and the tax professional community.”

Other steps the IRS will take to reduce expenses include delaying information technology investments that would improve identity theft detection and provide the Taxpayer Advocate Service with a case management system, as well as other needed technology improvements, in the amount of $200 million. Cuts to the IRS enforcement budget will total $160 million and, among other effects, will reduce collections by $2 billion and result in 46,000 fewer audit closures, according to the commissioner.

Koskinen also warned that cuts in overtime and temporary staff of more than $180 million will delay refunds for some taxpayers and further increase delays in responding to taxpayer correspondence and phone calls. The budget cuts will also require extending the IRS’s hiring freeze, which will effectively reduce full-time staff by 16,000 to 17,000 from 2010 staffing levels.