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Do IRS diminished resources mean reduced enforcement?

On Behalf of | Mar 27, 2020 | Tax Law |

You may have heard recently that a lack of staff resources has led to reduced tax compliance. From 2010 to 2017 there has been a significant decrease in IRS personnel used for audit examinations from 13,138 to 8,205, representing a 38 percent decrease in just seven years. 

However, the IRS is still paying attention.  While it may be true on the human resources side, it is certainly not the case that it has led to fewer audits. In fact, as people-power has gone down at the IRS, technology has increased.

You have a tax problem and need to put it behind you

Diminishing staff resources doesn’t mean you should forget about your tax problem. While reduced staff resources has led to a steady decline in proposed assessments over the past decade (tumbling from $4 billion for the 2007 fiscal year to $29 billion ten years later), enforcement is still a reality at the IRS. If you are on notice for an assessment or have been running one step ahead of facing your arrears problem, the IRS hasn’t forgotten about you.

What the numbers look like  

With only the nonpayment of taxes portion of the Tax Gap estimated to be $39 million annually, it is easy to see how much is being missed. Other effects of the reduced IRS resources include:

  • Reduced payment compliance: In ten years, field revenue officers have dropped more than 42%. With fewer than 1,652 field revenue officers collecting, it is estimated that $3.3 billion less each year is going back to the treasury. 
  • Suspension of the Automated Substitute for Return Program: Non-filers account for an estimated $32 billion of the Tax Gap, and the ASFR program was created to address the issue of non-filers and collect the money the treasury is missing out on from failing to follow up on these leads. While the program collected nearly $11 billion, it was recently halted as a response to cuts in resources. 
  • Failure to pursue high-income taxpayers: Resource issues have also led to decisions in the IRS to not pursue high-income taxpayers that had filed for extensions in previous years but never completed a tax return. 
  • Constraints on the Criminal Investigation division: Responsible for investigating and pursuing tax-related crime, the CI division has reduced its agent force by 26% over the past ten years. Even though the IRS has requested additional funding to create more of these positions, the amount requested will still not bring them up to the level of personnel they had even five years ago. 

Budget requests for 2020

Budget requests have been made by the IRS to increase their personnel so they can address compliance issues. They are requesting:

  • 943 Examination personnel
  • 173 Field Collection Revenue agents
  • 144 agents for the Criminal Investigation division

Even though the requested additional personnel will not reach the levels of staff the IRS utilized ten years ago, the additions could go a long way to improving both the efficiency and the effectiveness of tax compliance programs while allowing the IRS to significantly reduce the growing Tax Gap. If resources continue to diminish, the IRS expects significantly more issues with regards to tax compliance.