If you’ve ever been tempted to fiddle with your federal income taxes, this may be the year to go for it. There has never been a better time.
Your odds of getting caught by underreporting your income, or inventing deductions, credits or dependents you don’t really have are getting better (for tax cheats) every year.
The IRS workforce is down 13,000 people since 2010. Its limited hiring program — one replacement for every five departures — is now over. Hiring, effective immediately, is frozen except in a few critical areas.
Why shouldn’t Muffin, your beloved poodle, be listed as a dependent? And Boots or Fluffy your loving kitty of nine years, is like your own child, right? And cat food and kitty litter don’t grow on trees.
The IRS is swamped with more taxpayers than ever before. And being overrun by an increasingly complicated, changing and loophole-ridden tax code. Also, Uncle Sam’s biggest money maker (or collector) is doing all this with increasingly outdated equipment and fewer employees.
In the not-too-distant future the words “voluntary compliance” (now the bedrock of the American tax system) may wind up as a “what is” question in the Dead Languages topic on TV’s Jeopardy show.
Friends and foes of the IRS disagree as to how much money the agency actually brings in for every dollar it spends. But both agree that it is a lot. Hundreds in income (revenue) for every one buck spent collecting.
Meantime, service to taxpayers, is slipping. Each year.
Despite the problems, Congress keeps chopping the IRS budget and staff, then dreaming up new taxes to make up for the revenue shortfall. Publicity about IRS cracking down on conservative (tea party) groups has made the agency even more unpopular with some citizens and politicians. Democrats say it was a minor problem confined to the Cincinnati office. Republicans see it as a strong-arm operation that came straight from the top in Washington.
The White House brought in John A. Koskinen to run the IRS. To say he is a veteran of top government service is an understatement. He may have the longest success resume in Washington. But not even Houdini, at his peak, could make the IRS’ money-problem go away.
So what is the situation at the IRS. Commissioner Koskinen yesterday sent an internal memo to his troops yesterday. It will either:
Inspire you to write your elected officials in Washington, or,
Convince you to contact your almost-a-CPA brother-in-law who guarantees he can get you a five-figure refund on the ostrich farm you two sort of “own” on paper.
Meantime, here’s part of the in-house memo:
“I am deeply disappointed by this troubling development (the cut in the proposed budget), and I want to explain what this means for our operations going forward.
“Let me put these numbers in perspective. This budget marks the fifth year in a row that the IRS has seen a budget reduction, a number made even more severe because our mandatory operating expenses go up every year. Here are some key numbers:
“The 2015 budget falls $1.2 billion short of our 2010 budget of $12.15 billion. The plan by Congress also is $1.5 billion below what the Administration proposed this year for the IRS.
“Since 2010, the budget reductions mean we have 13,000 fewer employees — a number that will grow by several thousand by the end of 2015.
“The 2015 budget would be the lowest since 2007’s budget of $10.6 billion. Since then, the IRS has been given added responsibilities such as implementation of FATCA and the Affordable Care Act.
“When inflation is factored in, the 2015 budget is comparable to the IRS budget of 1998. But we now receive 27 million more individual tax returns and 3 million more business returns than we did 17 years ago.
“The cumulative effect of these cuts will significantly undermine our ability to serve taxpayers, and they will touch all of our service, enforcement and support operations.
“For the upcoming filing season, we estimate that only about 50 percent of taxpayers who call can reach us over the phone. Some 24 million Americans may not be able to reach us for help. Those who do get through could easily wait 30 minutes or more for limited service.
“The budget cut will have an amplified effect on tax enforcement and revenue collection, and the cutbacks in IRS enforcement resources and casework will mean that billions more in taxes owed to the nation will remain uncollected. The budget reduction of $346 million from Congress will reduce our enforcement collections by at least $2 billion which is at odds with the Government trying to deal with a significant deficit.
“How we put this budget into effect will be worked out in coming weeks with all the senior leaders of the agency. We will also be consulting with the leadership of the NTEU. But there’s no doubt we will have to take some difficult steps. Our hiring — already limited at a ratio of one hire for every five people who leave — will be frozen with only a few mission-critical exceptions. We will trim limited travel even further, and that includes my own travel to meet with employees. We will stop overtime except in critical situations. We will review all contracts and other places where we can possibly realize further savings. And I have asked the heads of our organizational divisions to look for ways to cut their operating budgets during the next nine months. But I have made it clear that we will do our best not to take actions that make your job more difficult or less satisfying. This includes continuing to provide you with appropriate training and technology support.”
The idiom “Cheaters never prosper” can be traced back to the early 19th century, but a similar phrase can be found in John Harington’s Epigrams, which dates to the early 17th century: “Treason doth never prosper, what’s the reason? For if it prosper, none dare call it treason.”
IRS imposes hiring freeze, eliminates OT due to budget cuts Budget cuts at the IRS could delay tax refunds, reduce taxpayer services and hurt enforcement efforts, IRS Commissioner John Koskinen said Thursday. About half the people who call the IRS for assistance this filing season won’t be able to get through to a person, Koskinen said. Once tax returns are filed, there will be fewer agents to audit them.
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