Washington D.C. – The IRS, which has lost nearly 18,000 permanent employees in the last six years, is processing more and examining fewer returns, according to the 2016 IRS Data Book released today.
The statistics show how years of budget cuts and increased workloads are hampering the agency’s ability to enforce the tax laws and collect the revenue that is owed the U.S. Treasury. In light of the administration’s current proposal to slash another $239 million from the agency’s 2017 budget, the National Treasury Employees Union urges Congress to consider today’s report as further evidence that taxpayers need the IRS to be adequately funded.
“This year’s report proves what we have already been hearing from our members: That trying to do more with less at the IRS only hurts honest taxpayers who need assistance, and allows cheaters to slip through the cracks,” said NTEU National President Tony Reardon.
For example, the IRS processed 230 million returns and other forms in 2010 with 92,148 permanent employees. In 2016, the returns and forms were up to 244 million—with returns getting more complex—and the workforce is down to 74,151 permanent employees.
“Critics may think that budget cuts at the IRS save money, but the opposite is true. The IRS is responsible for collecting 93 percent of our nation’s revenue and when there aren’t enough people to help individuals and small business owners through the process, the entire system of voluntary tax compliance falters,” Reardon said. “We agree with Treasury Secretary Steve Mnuchin who told Congress that cutting staff is counterproductive to collecting taxes that are owed.”
The report itself draws a direct correlation between fewer staff and less enforcement.
“Key measures of enforcement activity, including audit rates, have also declined in several categories,” the report states.
An indicator of enforcement is in the number of individual returns that are examined by IRS employees. In 2010, almost 1.6 million returns, or 1.1 percent, were reviewed. In 2016, that figure dropped to just over 1 million, or 0.7 percent.
At last count, there was a tax gap of $406 billion in the United States, or taxes that are owed but not collected, according to the Tax Policy Center, and this report shows why that money too often goes uncollected.
Since 2010, the number of Revenue Officers dropped from 5,922 to 3,547, and Revenue Agents went from 14,588 to 10,244.
“Inadequate staffing has resulted in a cumulative reduction to enforcement revenue of over $30 billion between 2010 and 2016. If the FY 2010 enforcement staffing levels had been maintained, the IRS could potentially collect on average approximately $10 billion more in enforcement revenue annually in the future,” a group of congressional lawmakers, led by Rep. Keith Ellison (D-Minn.), wrote in a letter yesterday. The letter made the case for increased funding for the IRS to the House Financial Services and General Appropriations Subcommittee.
The numbers are also unsettling for lower- and middle-income taxpayers who can’t afford to hire a professional tax preparer and need access to the free assistance the IRS provides in person or on the phone.
In 2010, there were 21,057 customer service representatives, and in 2016, that number dropped to 9,563.
“This report reinforces our endorsement of a request by Rep. Ellison and others that Congress appropriate $12.9 billion for the IRS in fiscal year 2018,” Reardon said. “The civil servants of the IRS stand ready to assist taxpayers during this filing season and the least we can do is give them the resources they need to do their job.”