You’re Less Likely to Be Audited — but Is That a Good Thing?

Since 2010, the IRS budget has been cut by 17 percent. What do such cutbacks mean for taxpayers?

You’re Less Likely to Be Audited — but Is That a Good Thing? Photo (cc) by stevendepolo

Over the past couple of tax seasons, IRS security breaches that have put taxpayers’ sensitive information at risk have highlighted an underlying problem of underfunding.

But a recently updated report from the Center on Budget and Policy Priorities (CBPP) says that the rise in cybersecurity problems is just one of several ways the shrinking Internal Revenue Service budget hurts the federal agency — and in turn, taxpayers.

Since 2010, the IRS budget has been cut by 17 percent, after adjusting for inflation. That has led to cutbacks in staff and employee training and delays of technology upgrades, according to the CBPP:

These steps, in turn, have weakened the IRS’s ability to enforce the nation’s tax laws and serve taxpayers efficiently.

Less enforcement means fewer audits, which means the IRS recoups less money for the federal government. Less efficient service means taxpayers who need to contact the IRS wait longer on hold — or never get through.

In response to criticism, Congress recently added $290 million to the IRS budget for fiscal year 2016, but the CBPP argues it was “not enough to make up for the deep funding cuts, and the resulting reductions in personnel, the IRS has experienced since 2010.”

As the current IRS commissioner, John Koskinen, testified to Congress last week:

“The IRS has been operating in an extremely difficult budget environment for several years, as our funding has been substantially reduced. In FY 2016, our funding level is more than $900 million lower than it had been in FY 2010.”

The shrinking number of audits is perhaps the most costly side effect of the shrinking IRS budget.

According to the CBPP report, the number of IRS staff devoted to enforcing tax laws has dropped by 23 percent since 2010. As a result, the number of audits conducted in 2015 was 22 percent lower than it was in 2010. Last year, the IRS audited 0.8 percent of individual tax returns, which is the lowest share in a decade.

While fewer audits might sound like good news to taxpayers, it costs the country at large. According to the CBPP, IRS audits have recovered 30 percent — or $30 billion — less in revenue over the past five years compared with the prior five years.

What’s your take on the effects of the IRS budget struggle? Share your thoughts below or on Facebook.

Karla Bowsher
Karla Bowsher
I’m a freelance journalist and former newspaper reporter who has covered both personal and public finance. I've worked for a top 50 major metro daily and a community newspaper as well as ... More

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