Don't Mess With Taxes

It's going to be a mixed Thanksgiving in Internal Revenue Service households.

The agency definitely won't be thankful for the Senate funding bill released on Nov. 20. That Financial Services & General Government Appropriations measure proposes the IRS get $11.1 billion in fiscal year 2018.

That's $149 million less than it received for the 2017 fiscal year.

However, the IRS can be grateful that the funding is close to the $11.235 billion that then IRS Commissioner John Koskinen said the agency needs to maintain its current performance levels.

And it's $111 million more than what Donald J. Trump's budget recommended the IRS get. 

Funding with strings: The figures approved this week by the Senate Appropriations Committee are the same as the amounts in the House's $1.2 trillion spending bill passed by that chamber on Sept. 14.

Both legislative bodies also put some restrictions on the money.

IRS-related highlights of the funding bill include measurable improvements to the level of customer service, identity theft protection, and enhanced cyber security to safeguard taxpayer data. The Congressional funding measures say no money can be spent for:

• Bonuses or to rehire former IRS employees unless employee conduct and tax compliance is given consideration;
• Targeting groups for regulatory scrutiny based on their ideological beliefs;
• Targeting individuals for exercising their First Amendment rights;
• Producing inappropriate videos and conferences.

Why the spending limits, guidelines: Senators defended these fiscal accountability requirements in the FY18 proposal by taking a whack at the IRS in the bill's explanatory statement, accusing the agency of being out touch with many taxpayers.

Specifically, they say (emphasis — and links — added by me):

    "Unfortunately, the IRS does not seem to have its priorities in order. The Committee remains concerned about IRS's Future State vision where taxpayers will rely on online services for their IRS interactions. According to the National Taxpayer Advocate, a central component of the IRS's Future State plan is to migrate taxpayers away from interacting with the agency by phone or in person and toward interacting with the agency through online accounts. In addition, according to the National Taxpayer Advocate, there are about 33 million taxpayers who do not have broadband Internet access, and about 14 million taxpayers who do not have any Internet at all.

    While some evolution in service delivery can be expected, it is the IRS's ability to manage that change without adversely impacting taxpayers that is most worrisome. The protection of taxpayer data is of particular concern given the mistakes the IRS has made in the past in its rush to expand online services. The IRS's online tools and applications such as Identity Protection Personal Identification Number, Get Transcript, and the online Data Retrieval Tool used to assist those filling out the Free Application for Federal Student Aid have been subject to cyberattacks, resulting in the loss of taxpayer information. The committee encourages IRS to adhere to recommendations by the Inspector General and Government Accountability Office [GAO] to strengthen its security controls.

    The IRS continues to ignore the impact of its own behavior on the attitudes of taxpayers. When the IRS takes actions that represent a serious breach of the trust of the American people, it undermines taxpayers' faith in the impartiality of the agency. The self-inflicted damage harms the very credibility that is essential for our voluntary compliance system to function. Americans have lost faith in the institution and it is incumbent upon the agency to regain the trust of the taxpayers.

    Unfortunately, there continues to be evidence of a culture that is simply out of touch with taxpayers and their concerns. When the IRS singles out certain groups for disparate treatment it should not be surprised by the lasting impact such actions have on taxpayer attitudes. When the IRS hires employees with past performance or conduct issues, it does nothing to maintain the public trust in tax administration or build confidence in the IRS's ability to safeguard taxpayer's rights and privacy."

In addition, the Senate appropriations members contend that "IRS management seems to have forgotten that their most important customers are not their own employees."

The members of Congress also expressed concern about the IRS role in the Affordable Care Act, particularly the number of potential fraudulent claims related to premium tax credits and the security of individual tax data as the IRS provides information to health exchanges.

Like I said, there's a lot for the IRS to talk about — and decide how thankful to be — at this year's Turkey Day dinner.

You also might find these items of interest:

• IRS security breach highlights need to rethink online privacy
• 7 former IRS commissioners chastise Congress for slashing the tax agency's budget, urge full funding
• Representatives, Senators fall over each other in rush to ban bonuses to IRS employees who owe federal taxes