IRS Suffers Cuts in Services

I know. Terrible, isn’t it?

Funding levels for the IRS have dropped since 2010 and they are feeling the effects. Personnel is down; services are cut; workload is up.

This means that examinations, such as audits, are down. Many more of them are what is considered paper audits (through the mail). According to the Kiplinger Tax Letter, “Last year’s audit rate of 0.96% for individuals was the lowest since 2005.” Audits for 2014 should be in the 0.80% range, so even lower.

In addition, experience auditors are increasingly retiring and being replaced by more inexperienced examiners. So correspondence audits will continue to climb. They typically question just one or two items on the return; half of them deal with the earned income credit. These paper type audits account for almost 75% of all audits.

In addition, the IRS is behind on handling correspondence from taxpayers. It fails to respond timely to less than half of taxpayers who refute adjustment to returns. Their goal is to respond within 30-45 days. Currently they are taking months on many responses. Notices no longer promise response dates. Those that sent in support documentation for their positions are often still getting billed.

Because of cuts, funding has been cut for walk-in tax preparation service. So help won’t be available at IRS offices for taxpayers. There will also be two less electronic services for tax preparers: Disclosure Authorization and Account Resolution applications can no longer be filed online.

Bottom line: less help for individual taxpayers, less help for professional preparers, less income for the federal government because audits of the true tax cheats will be reduced. That’s a lose/lose for taxpayers.

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