Watchdog: IRS struggles with budget cuts as taxpayers struggle with ID theft, Obamacare

WASHINGTON – The IRS provided poor customer service during this year’s tax filing season as taxpayers struggled with a rise in identity theft and complications related to President Barack Obama’s health law, a government watchdog said Wednesday.

A new report by the National Taxpayer Advocate says the IRS has been hampered by budget cuts.

The report says the IRS blocked nearly 1.6 million suspicious tax refunds this year because of concerns about identity theft. About a third of the refunds turned out to be legitimate, but for long stretches during tax season, fewer than 10 per cent of callers could get through to an IRS help line.

“For the majority of taxpayers who filed their returns and did not require IRS assistance, the filing season was generally successful,” said the report by Nina E. Olson.

“For the segment of taxpayers who required help from the IRS, the filing season was by far the worst in memory,” the report said. “To a significant degree, the IRS’s shortcomings are budget-driven.”

The taxpayer advocate is an independent office within the IRS.

Overall, only 37 per cent of people who called the IRS for help during tax season were able to reach a person, the report said. For those who got through, the average time on hold was 23 minutes.

IRS help lines were so overloaded that the system hung up on 8.8 million callers, the report said. That’s a huge jump from last year, when the IRS hung up on 544,000 callers.

The IRS calls the hang-ups “courtesy disconnects,” because the system hangs up early in the call, rather than making callers wait on hold, only to be disconnected later.

“It is important to note that the IRS must carefully balance limited resources to meet its dual mission of providing taxpayer service and enforcing the tax laws,” the IRS said in a statement. “With 75 per cent of our budget being personnel, and one-third of our workforce providing taxpayer service, the continuing cuts to our budget have severely hampered our ability to provide taxpayers with the services they need and deserve.”

The report by the taxpayer advocate noted that taxpayer services suffered just as Americans were faced with new requirements under the health law.

For the first time, taxpayers had to say whether they had health insurance the previous year. Millions who received government subsidies to pay for premiums had to report those on their returns. Others who didn’t have health insurance had to pay fines.

About 6.6 million taxpayers paid fines because they didn’t have health insurance, the report said. The fines averaged $190.

About 2.6 million families said they received subsidies to help pay for premiums. The subsidies come in the form of tax credits. They averaged $3,000 per tax return, for a total of about $7.7 billion.

Overall, the IRS has done “a commendable job” implementing the initial stages of the health law, despite budget cuts, the report said.

Republicans in Congress adamantly oppose Obama’s health law, so some have been working to starve the IRS of funds just as its role in implementing the law ramps up.

Congress has cut the agency’s budget by $1.2 billion since 2010, and House Republicans are proposing more cuts next year.


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