As federal budget cuts loom, the Internal Revenue Service is preparing to do more with less. The power of the IRS was strong enough to prevent more than $4 billion in refunds to potential tax cheaters last year, an enormous increase of more than 170 percent from tax, penalties and interest collections the previous year.
The IRS news was hailed in a recent federal report, although some of the money that was recovered since 2010 struck a sheepish note. The Treasury Inspector General for Tax Administration noted the IRS paid more attention to prisoners’ tax returns, only after discovering that 50,000 incarcerated individuals claimed more than $130 million in refunds, most of which went unchecked.
Even while prisoner tax returns became a hurry-up-and-fix situation for the government agency, the IRS ramped up the number of tax fraud investigations last year by 14 percent. More than 73 percent of America’s wealthiest people were audited last year than in 2009.
Expectations for the tax agency’s future have not waned despite the likelihood that the IRS budget will shrink. If anything, taxes are more complex now than they have ever been.
The TGTA report chided the IRS for letting more than $140 million in unqualified tax credits slip through the processing cracks, an erroneous bonus to more than 140,500 taxpayers. Compared to the 130 million-plus tax returns the IRS processed in the last year, the refund snafu appears minute.
Some taxpayer advocacy groups, however, are unimpressed by IRS collection numbers and more concerned about customer service, or lack thereof. A representative of National Taxpayer Advocate testified before Congress that the IRS often ignores requests from taxpayers for help.
About 25 percent of people who phone the IRS never reach a representative. Those who do manage to talk to an IRS employee usually wait on hold for about 11 minutes before having a conversation.
The advocacy group suggested that more IRS resources should be devoted to taxpayer care. It estimated that just five percent of the agency’s budget goes toward taxpayer service.
Source: TIME, “IRS Catches More Tax Cheaters — But They’re Already In Prison,” Jonathan Berr, Nov. 17, 2011