Thursday, July 7, 2011

Budget Cuts For IRS Is At The Top Of The List Of Concerns

The impact of budget cuts for IRS is at the top of the list of concerns detailed in an annual report to Congress that identifies the priority issues the Taxpayer Advocate Service (TAS) will address during the coming fiscal year. (National Taxpayer Advocate Fiscal Year 2012 Objectives Report to Congress) The report voices strong concerns about the effect of potential budget cuts on taxpayer service and tax compliance. “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,” the report says, adding that “[w]hen the IRS cuts corners, taxpayers can be harmed and revenue collection may suffer.” IRS's lien filing practices are also a focus of concern in the report. In particular, it spotlights the agency's practice of automatically filing tax liens based on a dollar threshold instead of basing lien-filing decisions on an analysis of the taxpayer's financial situation. According to the report, during FY 2012, the TAS intends to devote attention to the issue of tax reform and tax complexity. It will try to come up with answers to the persistent problem of Earned Income Tax Credit noncompliance. Working with IRS, it will also try to mitigate identity theft problems and improve identity theft case processing. In addition, it will seek to improve the rules regarding innocent spouse relief. “The IRS has made significant progress on important fronts over the last year, including the implementation of return-preparer regulation, the transition to the Customer Account Data Engine 2 (CADE 2) to improve returns processing, and the streamlined processing of offers-in-compromise,” said Nina Olson, the national taxpayer advocate. “At the same time, the IRS faces significant challenges in the year ahead, particularly if its budget is reduced.” The report is available at

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