Small Business Taxes & ManagementTM--Copyright 2015, A/N Group, Inc.
Highlights of Speech by IRS Commissioner Koskinen
On November 3, IRS Commissioner Koskinen spoke before the AICPA National Tax Conference. Here are the highlights of his speech.
IRS Budget. The Commissioner noted that for Fiscal 2015 the IRS budget was just $10.9 billion, a cut of $1.2 billion over the last five years. It's at the lowest funding level since 2008, and, adjusted for inflation, it's comparable to the Service's 1998 budget. Over the last several years the number of full-time employees has been reduced through attrition by 15,000. Included in that number were 5,000 key enforcement personnel.
Taxpayer Service. The Commissioner noted the long wait times for service on the phone with fewer than 40 percent of calls answered by a live assistor on bad days. That's after a 30-minute wait or longer. Long waits also were noticed at some Taxpayer Assistance Centers.
Audits. The IRS completed about 1.2 million individual audits in Fiscal 2015. That's 13,700 fewer than the previous year. Even more disturbing, the decline in audits in 2015 was not a one-year aberration. The number for 2015 was 350,000 below five years ago. That's a drop of 22 percent, and corresponds exactly to the number of revenue agents, which is also down 22 percent since 2010. During that same period, the number of income tax returns filed by individuals topped 146 million, an increase of almost 3 percent from 2010. Between 2005 and 2010 revenue from audits averaged $14.7 billion; since 2010 it's averaged only $10.5 billion. Koskinen estimated that $1 invested in the IRS results in $4 in revenue. The Commissioner also estimated that, because lower enforcement results into lower compliance, a one-percent decline in the compliance rate translates into $30 billion in lost revenue.
IT. The lower budget has also impacted the IRS's information technology work. Recently, upgrades have been delayed. There is also an impact on cybersecurity and identity theft.
Additional Responsibilities. Commissioner Koskinen noted that the IRS has spent significant time and resources over the last several years implementing the tax-related provisions of the Affordable Care Act. This mandate came without a dime of additional funding. It meant that the Service had to take anywhere from $300 million to $450 million each year from other critical needs to meet this statutory mandate. Another resource drain was the Foreign Account Tax Compliance Act, or FATCA. Although we received a small amount of funding for FATCA, we have still spent significant time and resources on implementation for a number of years. As part of that work, we are now in the process of beginning the exchange of significant volumes of information with countries around the world. Koskinen cited several other examples.
Extenders. Koskinen said "The uncertainty we face over the extenders legislation raises operational and compliance risks for the IRS in its administration of the tax law and delivery of the filing season. This uncertainty imposes stress, not only on the IRS, but also on the entire tax community, including everyone in this room. If this uncertainty persists into December, we could be forced to postpone the opening of the 2016 filing season. This would delay the start of processing of tax refunds for millions of taxpayers. It's also important for lawmakers to understand what the effect would be if they made any substantive changes to tax provisions that are extended, or decided to approve any new tax provisions. We would need to reprogram our systems and make processing changes that would result in delays."
Condensed Audit Statistics--Individual Returns
FY 2012 FY 2013 FY 2014 FY 2015
Field Audits 359,750 344,152 291,643 267,498
Correspondence Audits 1,122,216 1,060,779 950,836 961,261
Total Individual Audits 1,481,966 1,404,931 1,242,479 1,228,759
Examination Revenue $10.20B $9.83B $12.51B $7.32B
Returns Filed 143,399,737 145,819,388 145,236,429 146,861,217
Audit Coverage 1.03% 0.96% 0.86% 0.84%
Notes: 1. Examinations are generally of prior year filings, therefore the number of returns cited is for the prior calendar year for each column, e.g., for the coverage percentage, the number of audits in FY 2015 is to be compared to the number of returns filed in the prior year.
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--Last Update 11/04/15