http://www.politico.com/story/2014/12/irs-congress-john-koskinen-113714.html?hp=c2_3How bad would an IRS shutdown be?
By Rachael Bade
12/19/14 6:16 PM EST
The IRS chief’s warning on Thursday that drastic budget cuts may force a shutdown for perhaps days is his latest bid to illustrate the impact of starving the tax agency.
But how bad would it really be?
It may be that the only way Congress will heed IRS commissioner John Koskinen’s plea for more money is if they see the damage that a collective $600 million budget gap would bring: confused taxpayers, delayed refunds and tax cheaters looting the Treasury.
But Koskinen, appointed by President Barack Obama to clean up the agency after the tea party targeting affair, will have to tread carefully, keeping his responsibility to protect taxpayers and ensure a smooth tax season — or risk the wrath of the public and Republicans in Congress who’ve so far ignored his efforts to stop several years of budget bleeding.
“Tens of thousands of people are reaching out to the IRS on a continuing basis, so you’re just going to have a general deterioration of the efficiency and effectiveness of the organization — the ability of taxpayer to get through, get their letters answered, or get something resolved,” said former President George W. Bush’s IRS Commissioner Mark Everson, vice chairman of alliantgroup. “If there’s a furlough day, they can’t get through to anybody.”
On Thursday, Koskinen said closing the agency for several days would be a last resort. He didn’t note when the furloughs might occur, but last year’s three furlough days, due to sequestration cuts, avoided tax season.
Former IRS officials expect Koskinen to do the same this time around.
“It would be irresponsible to shut down during the filing season because it would delay refunds and cost the government money. … They are where they are [financially], and it’s not a good place to be, but they ought to be responsible about it,” Donald Korb, former IRS chief counsel now with Sullivan & Cromwell, said, adding that off-season furloughs are “not the end of the world.”
Congress last week cut the IRS budget by nearly $350 million to $10.9 billion, a reduction atop several years of additional cuts. It also recently required all agencies to give federal workers a 1 percent pay raise — so Koskinen says the IRS money hole is more like $600 million.
They have nine months to figure out where to cut, and already announced a hiring freeze and end to overtime pay. But since 75 percent of IRS costs are personnel-related, Koskinen said he can’t rule furloughs out.
The cuts and shutdown threat come as the IRS gears up for a complicated tax season — with big new responsibilities, including implementing Obamacare’s tax credits and penalties, and a new financial reporting law.
The reductions are already threatening to delay tax refunds, Koskinen warned Thursday. A shutdown during tax season atop that would only exacerbate the problem.
With its new responsibilities, the IRS is expecting more calls. Yet due to budget cuts, only about half of people who call the agency for help will actually get to talk to someone — and only after waiting an average of a half an hour.
An IRS official recently told POLITICO that they’ve had no money to stock printer toner, have “had to scurry for other supplies” and are being trained to drive callers to the Internet to get their questions answered.
“Most of us on the front line want to serve, want to help, want to answer any questions that we can, but if we’re flat out told it’s no longer our prerogative, we’re stuck,” the employee who wished not to be named said.
But even a shutdown in the off-season later in the year will bring major headaches.
Employees will take a hit. If the IRS was to bridge the $350 million budget cut entirely with employee furloughs, the agency would be shut down for more than 12 days. (Each day saves the IRS $29 million.) If they were to do the full $600 million gap? That’s almost 21 days — three full weeks.
That’s several thousand dollars’ worth of salaries each that IRS employees could lose.
Taxpayers who reach out to the IRS throughout the year will also be affected. Those seeking information about audits or tax adjustment notices might be out of luck if they call for help on a furlough day.
Suspected delinquent taxpayers could also run into roadblocks if the IRS files a lien on their property or freezes their bank account — and they can’t get through for immediate help.
On the flip side, victims of identity theft often call the IRS to report the crime. If they call or drive to one of the walk-in centers on a shutdown day they’ll be vastly disappointed.
There are other deadlines that could present problems for an off-season shutdown. Quarterly business filings, for example, are due throughout the year. And extensions for paying and filing taxes, which expire Oct. 15.
During the last batch of furloughs, the IRS said deadlines wouldn’t be moved despite closures.
“Taxpayers needing to contact the IRS about their returns or payments should be sure to take these furlough dates into account. In some instances, this may include taxpayers with returns or payments due soon after a furlough day, such as the June 17 deadline for taxpayers abroad and those making a second-quarter estimated tax payment as well as the Sept. 3 deadline for truckers filing a highway use tax return,” a 2013 release said. “[T]he shutdown will have no impact on any tax-filing deadlines. … Similarly, tax-payment deadlines are also unaffected.”
Also discontinued during a shutdown, according to the 2013 furlough release: some Web-based services, including the Where’s My Refund? tool to help taxpayers locate their money.
Despite the warnings, Koskinen repeated that it was not his first choice.
“Again, I would stress that would be the last option.”
