How IRS budget cuts affect U.S. taxpayers

On Behalf of | May 3, 2016 | Tax Controversies

While the Internal Revenue Service has long been reviled by U.S. taxpayers, historically, the agency has largely been viewed favorably by, or at least tolerated among, those within Washington. Within the last decade, however, the IRS has been the target of much hatred and blame by many republicans.

In an effort to prove just how incompetent and ineffective the agency is, Congressional Republicans have consistently worked to cut the IRS’ budget by nearly $1 billion since 2011. Such budget reductions have worked to undermine the agency’s ability to successfully carry out various enforcement actions as well as fulfill its obligations with regard to providing assistance to taxpayers.

Consequently, as we noted in a recent blog post, the IRS tax audit rate is currently “at the lowest level in a decade” with just one percent of U.S. taxpayers being singled out for audits. Additionally, the IRS recently revealed a projected $458 billion in unpaid taxes for the fiscal years 2008 to 2010. While taxpayers may view fewer audits and fewer IRS enforcement actions with regard to the collection of taxes and tax debts as being positives, the agency’s dwindling budget also has some negative implications.

From 2010 to 2014, the number of IRS cases involving identity theft and fraudulent returns increased from roughly 182,500 to 730,000. Additionally, the agency reports that it is the target of roughly one million cyber attacks each day. With the agency’s staff of criminal investigative and enforcement agents continuing to shrink, the IRS’ ability to prevent major security breaches is also compromised. With no signs that the apparent war being waged by Congressional Republicans against the IRS  will end anytime soon, the agency’s ability to enforce compliance measures is likely to continue to decrease.

Regardless of one’s opinion of the IRS, business owners and individuals are advised to comply with tax rules and regulations. This includes filing accurate tax documents and paying taxes on time.

In cases where an individual is the target of an IRS audit or he or she wishes to dispute an IRS collection matter, it’s important to seek the advice and assistance of a tax professional. An attorney who handles tax-related matters can provide advice and help taxpayers resolve IRS disputes in a timely and cost-effective manner.

Source: The New York Times, “Unpaid Annual Taxes Rise to $458 Billion, I.R.S. Reports,” David M. Herszenhorn, April 28, 2016

The New York Times, “I.R.S. Fights Back Against House Republicans’ Attacks,” Jackie Calmes, April 21, 2016