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

An IRS watchdog says the tax agency provided poor customer service during this year's tax filing season as taxpayers struggled with identity theft and President Barack Obama's health law.

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A report issued Wednesday by the National Taxpayer Advocate says the IRS has been hampered by budget cuts. Congress has cut the agency's budget by $1.2 billion since 2010.

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

Also, the report said 6.6 million taxpayers had to pay a fine because they didn't have health insurance. The fines averaged $190.