Taxpayers may rue budget cuts for IRS

Taxpayers may rue budget cuts for IRS

The Internal Revenue Service has few fans but serves a vital function. Currently, budget cuts and other problems at the bureau are costing taxpayers. Source of article: IRS budget cuts costing taxpayers

Less money to pay workers

Few federal agencies are as maligned as the Internal Revenue Service. The Joe or Jane Taxpayer might think that trimming the IRS budget is a blessing. However, there are consequences of making it more difficult for the Internal Revenue Service to do its job.

As reported by the Washington Post, the operating budget for the Internal Revenue Service for this year is $11.8 billion, $1.5 billion less than what was requested by the president and $300 million less than last year.

The IRS will not be able to operate as well with a lower budget since 92 percent of the Internal Revenue Service budget is for labor, according to Forbes. Last year, the Internal Revenue Service took about six weeks to respond to letters and faxes, on average, and from 2004 to 2010, the Internal Revenue Service was able to answer 17 percent fewer phone calls. There will be fewer individuals working at the IRS with the smaller budget.

Getting short term loans for bad credit can be faster than getting a tax refund

Imperfect automatic system

The <a href="http://personalmoneynetwork.com/moneyblog/2012/01/05/irs-tax-deadline/">IRS</a> has been using automation more in recent years. Unfortunately, this leads to a ton of mistakes. In 2010, 300,000 errors were found because of the children exemption. About 55 percent of those holds got reversed by the Internal Revenue Service. Recently, there have been more errors found than in the past, as reported by the National Taxpayer Advocate Nina Olsen. CNN points out that from 2006 to 2010, the number of mathematical errors found during returns jumped from 4 million to 10.6 million.

Olson also found, according to Forbes, that of the 1.05 million tax refunds held by the Internal Revenue Service for potential fraud by the Accounts Management Taxpayer Assurance Program or AMTAP, the Internal Revenue Service could not verify anything was wrong with 11 percent of the held refunds. Furthermore, of the 21,000 individuals who complained, 75 percent were eligible for their claimed refunds and waited a further six months on average to receive it.

About 34,053 of the 429,108 supposedly phony returns flagged by AMTAP’s “Operation Mass Mail” fraud deterrence program were actually legitimate.

Claiming loopholes without trigger

As more tax breaks are offered, the more fraud artists try to take advantage. In the first six months of the First Time Homebuyer Tax Credit's existence, as reported by the Wall Street Journal, 19,000 individuals tried to claim the credit without having purchased a home. A further 74,000 had previously purchased homes, and 500 people under the age of 18 claimed the credit, one of whom was 4 years old.

The Internal Revenue Service has way too much to do considering it went through 4,430 changes from 2001 to 2010 and 579 changes in 2010 alone. There was also a 72 percent jump from 2010 to 2011 in the number of tax fraud cases, according to the Washington Post.

Sources

<a href="http://www.washingtonpost.com/business/government-watchdog-tight-irs-budget-growing-workload-straining-agency-hurting-taxpayers/2012/01/11/gIQALRfnqP_story.html"><strong>Washington Post</strong></a>

<a href="http://money.cnn.com/2012/01/11/news/economy/taxpayer_advocate_audit/"><strong>CNN</strong></a>

<a href="http://www.forbes.com/sites/kellyphillipserb/2011/10/26/irs-gone-bad-are-things-about-to-get-even-worse/"><strong>Forbes</strong></a>