IRS fiscal 2019 budget proposal substantially the same, both in dollars and recommended tax priorities
Monday, February 12, 2018
Same old, same old. That's the message the Internal Revenue Service got today when the Trump Administration released its fiscal year 2019 budget. The IRS' base budget amount is about the same as prior years and some old tax enforcement ideas are proposed again.
It's no secret that the Internal Revenue Service has for years been asking for more money to do its job. Was Donald J. Trump listening when he and White House staff put together their new federal budget?
In the fiscal year 2019 budget released today, Trump proposes the IRS get a base budget of $11.1 billion. That's a cut from its previous $12 billion fiscal year allotment.
But the Trump Administration also proposes the IRS get an additional $15 billion over the coming decade so that it can "expand and strengthen the enforcement of tax law to ensure that all Americans are paying the taxes they owe." The initial portion of this funding would be $320 million in FY19.
The White House request is based on the assumption that you have to spend some tax money to get more tax money.
Specifically, the budget document says, "These additional investments proposed over the next 10 years are estimated to generate approximately $44 billion in additional revenue at a cost of $15 billion, yielding a net savings of $29 billion over 10 years."
OK. It sounds like at least some folks at 1600 Pennsylvania Avenue were listening to John Koskinen, who retired from the IRS commissioner post last November, when he said during a 2016 speech that it costs the IRS 35 cents to collect $100 in federal revenue.
IT emphasized: Increasing the IRS' efficiency is a key component of upping that return on investment even more. That's why Trump and his budget writers designated $110 million for information technology (IT) modernization efforts.
While taxpayers are increasingly turning to online IRS options, the budget document says that the agency itself "relies on antiquated tax processing systems (many of which date back to the 1960s) and handles most of its interactions with taxpayers, other than tax filing, through the mail."
Upgrades to the tax agency's systems, it says, would allow IRS staff to have up-to-date, accurate information about taxpayer accounts when they work with taxpayers.
Focus on enforcement: On the enforcement side, the budget would like to see the IRS spend its money next fiscal year on efforts that ensure that taxpayers comply with their obligations, that tax refunds are paid only paid to eligible taxpayers and that taxpayers are protected from criminals seeking to commit fraud.
To achieve those goals, the budget wants to:
- Require a valid Social Security number (SSN) for workers before they can claim the Child Tax Credit (CTC) and Earned Income Tax Credit (EITC). Currently, a taxpayer can claim the CTC if he or she files using an Individual Tax Identification Number (ITIN), which is used in cases where individuals cannot obtain the standard nine-digit identifier from the Social Security Administration.
In many cases, ITIN users are undocumented U.S. workers paying taxes on their earnings. A similar CTC requirement was part of the House version of tax reform, but did not make it into the final Tax Cuts and Jobs Act.
- Give the IRS the authority to correct more errors on tax returns before refunds are issued. This would keep refunds from being issued to taxpayers who are not eligible, argues the budget document. It also would let the IRS resolve simple issues quickly without having to direct enforcement resources away from more difficult cases.
The IRS already is authorized, in specific instances, to use its math error authority to summarily assess tax based on other third-party documentation it receives or when errors are apparent on a return, such as a transposed entry. In addition, the use of math error authority has increased significantly since 2008, when Congress granted the IRS math error authority to disallow refundable credits in an effort to prevent inappropriate payments. The IRS' authority here now covers 16 categories of mistakes or omissions.
Many, however, including the National Taxpayer Advocate, are leery of expanding IRS authority further. As far back as her 2011 annual report to Congress, National Taxpayer Advocate Nina Olson argued that the expansion of IRS math error authority already "far exceeds Congress' original purpose and relies too heavily on IRS discretion." Added expansion, Olson said then, will further jeopardize taxpayer rights. These are arguments she's continued to make through the years.
- Increase oversight of paid tax preparers. Yep, tax pros, the Trump Administration wants to revive this effort. The reason is the same one that the IRS has made in its earlier, unsuccessful attempts to regulate tax preparers: Since taxpayers are increasingly turning to paid tax return preparers to assist them in meeting their tax filing obligations, regulations would ensure that these preparers understand the tax code and thereby would provide taxpayers with higher quality service. Plus, it would prevent unscrupulous tax preparers from exploiting the system and vulnerable taxpayers, according to the budget.
The arguments from many in the tax community are well documented, literally in court cases that went against the IRS. Look for those legal filings to be dusted off if this proposal proceeds.
From wants to reality: Not surprisingly, Treasury Secretary Steven Mnuchin likes his boss' budget.
"President Trump's discretionary budget plan released today highlights Treasury's role in critical Administration policy initiatives. Treasury provides support for the President's policies promoting economic growth, protecting the national security of the United States, and imposing fiscal discipline in Washington," Mnuchin said in statement following the budget's release.
Of course, Trump's latest budget proposal, like all those delivered by presidents before him, is basically a wish list.
Congress, even one controlled by his own Republican party, will pick and choose from today's document to determine which components will appear in future legislation.
But it's always a good idea to have an idea of just what might happen and how much it will cost.
You also might find these items of interest:
- California tax attorney tapped to head IRS
- IRS bringing in more tax money despite budget cuts
- IRS 'Future State' plans and service, security concerns
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