Professor Andy Grewal and his law students recently tried calling the Internal Revenue Service to understand a complicated tax credit expanded in the new Republican tax law.
Fearing millions of Americans will wind up in similar informational dead-ends as they try to figure out their tax returns, Congress last week passed a $1.3 trillion omnibus package that bulks up funding for the IRS, including a $320 million short-term allocation to help the agency implement the tax law.
The overall IRS budget is also bumped to $11.4 billion in the next fiscal year. That is still down from the $12.1 billion the IRS received in 2010, a year in which the tax collection agency was not tasked with enforcing the biggest overhaul of the federal tax code in several decades.
The short-term $320 million boost is about 82 percent of the $397 million that IRS acting commissioner David J. Kautter told Congress that the agency would need to address the tax law. Kautter requested that money to help the agency over two years, so Congress could still provide the full funding during another appropriations bill. The national taxpayer advocate, an independent official within the IRS, has said the agency needs $495 million over two years to implement the law.
Congress's decision goes against the White House, which had pushed for additional cuts to the IRS budget. The administration sought to fund the IRS at $11.1 billion, down from $11.2 billion the year before. That request was opposed by Republicans in Congress, who cited the danger of further cuts to the agency. Even before the law’s passage, the IRS expected to be able to answer only 60 percent of the 100 million telephone calls it receives every year.
The law marks a sharp reversal for Republicans, who over the past eight years successfully cut the budget of the tax enforcement agency by about $1 billion and reduced its staff size by 18,000 people. But it's not clear whether the funding is enough to prepare the federal government for next filing season, with experts and former IRS officials offering a range of opinions. The $320 million increase can be used for enforcement, operations support and taxpayer services in rolling out the new law.
“The numbers remain concerning given the work the IRS has to do,” said Mark W. Everson, who served as commissioner of the IRS from 2003 to 2007 and now works at the tax consulting firm Alliantgroup. The IRS did not respond to a request for comment.
Others celebrated lesser-noticed changes to the IRS in the budget package, including new federal funding for programs that will help poor and elderly Americans understand and navigate the tax law changes, said Marvin Friedlander, who oversaw exempt organizations at the IRS before retiring in 2010.
“They got a bunch of money to implement the new tax law and for business systems, enforcement and taxpayer education,” Friedlander said. “It’s really good. Poorer and older people don’t have the resources to hire an accountant.”
Congress has traditionally increased funding for the IRS following big changes to the U.S. tax code. The 1986 tax overhaul signed by President Ronald Reagan led the IRS to hire an additional 1,300 staff members and increase the number of phone calls it answered by 30 percent. The 2008 stimulus bill prompted a 125 percent increase in the number of incoming calls.
Republican lawmakers have for months recognized the need to step up the agency’s funding in the wake of the law. The IRS is wrestling with a host of questions about the law, including which companies qualify for certain deductions and, among other issues, the legality of states' efforts to circumvent the new cap on residents' property tax deductions.
The increase agreed on by lawmakers may only partially offset the slow attrition from the agency. In 2017, the IRS lost 6,801 permanent staffers. Previous projections from National Taxpayer Advocate Nina Olson, an independent oversight official, found that only 4 of 10 callers could reach a live operator during the 2018 filing season.
“You need humans to answer the phones, and the rates are abysmal during filing season,” said Mark Mazur, who served as assistant secretary for tax policy at the Treasury Department under Barack Obama. “This really should be on top of a much bigger budget increase.”