The Internal Revenue Service, after years of budget cuts, will have its hands full implementing the new tax law, according to the agency's in-house public advocate.
Continue Reading Below
The tax agency needs to update forms, create new definitions, write regulations and field questions from taxpayers, which tend to increase when Congress passes new laws. That will be challenging for the IRS, which is planning to answer just 60% of taxpayer calls during the tax-filing season and has cut its training budget by 75% since 2009, said Nina Olson, the national taxpayer advocate.
"We have already seen confusion about withholding changes, confusion about the deductibility of prepaid property taxes, and confusion about whether states can allow taxpayers to make charitable contributions in lieu of taxes as a way of permitting their residents to claim larger tax deductions," Ms. Olson said as she released her annual report Wednesday on challenges facing taxpayers and the IRS. "With more funding, strong leadership, and a closer working relationship with Congress, I am convinced the IRS can do the job well."
It's far from clear, however, whether Congress will provide the IRS with additional money to implement the new tax system.
Since Republicans took over the House of Representatives in January 2011, they have clamped down on the agency's funding, a trend that accelerated after a 2013 inspector general's report found the IRS had used inappropriate criteria in giving scrutiny to some conservative groups seeking tax-exempt status.
The IRS budget declined 12.7% in constant dollars from its 2010 peak to fiscal 2016, according to agency data, and IRS staffing was down 17.7% in that period.
The IRS currently lacks a full-time commissioner and a permanent chief counsel, or top lawyer. Those are the only two politically appointed positions at the agency.
President Donald Trump hasn't nominated anyone to replace commissioner John Koskinen, whose term expired in November, or former chief counsel William Wilkins, who left in January 2017.
David Kautter, who is also the Treasury Department's top tax policy official, is serving as acting IRS commissioner.
Rep. Kevin Brady (R., Texas), chairman of the House Ways and Means Committee, said he met with Treasury Secretary Steven Mnuchin this week about implementation and that the administration is trying to prioritize resources.
"We just had a preliminary discussion about how best to address that," Mr. Brady said. "I assume it will require some resource. We don't know yet what they are and what the timing need is for it."
Rep. Tom Graves (R., Ga.), whose subcommittee oversees the IRS budget, said he'll "work with the Trump administration to make sure they have what's needed to fully implement the new law."
The agency will need $495 million to implement the law, according to an IRS estimate cited in Ms. Olson's report. She said the years of budget cuts have prevented the IRS from providing adequate taxpayer service or updating its technology.
" 'Shortcuts' have become the norm, and 'shortcuts' are incompatible with high-quality tax administration," she wrote in her report. "There is no doubt that the IRS needs more funding."
Still, she said, the agency could improve its performance in ways that don't require more money.
"Limited resources cannot be used as an all-purpose excuse for mediocrity," she wrote.
IRS funding will get addressed as lawmakers work on the spending bill for fiscal year 2018.
Write to Richard Rubin at email@example.com