This is shaping up to be a tough year for the Internal Revenue Service…and, potentially, for taxpayers. Not only is the agency hobbled by budget cuts, but it faces more demands due to Obamacare and rampant tax-related identity theft. Customer service will be worse than ever.
The IRS ideally projects an image of efficiency and fairness. But as a government agency, it also has to inform citizens about its inner workings. Gleaned from its public documents, here are 10 facts the IRS would probably rather the American public did not know:
1. It’s unlikely that you’ll get audited. The IRS audited fewer than 1 percent of individual returns last year and this number is likely to drop again this year due to budget cuts. The IRS budget approved by Congress this fiscal year is $10.9 billion, down from $12 billion in 2012. The agency has about 17,000 fewer staffers than it did in 2010. Meantime, it has to deal with a surge in tax refund identity theft (see No. 6, below) as well as complex new filing requirements related to Obamacare.
Of course, the odds of getting audited are a lot higher for some taxpayers. If your income is over $1 million, your chances of getting audited jumps to 11 percent. And there are plenty of additional red flags that can trigger an IRS audit.
2. Calling us for help is a crapshoot. If you need to speak to an IRS agent, you may be out of luck. Last year, 35.6 percent of phone calls went unanswered by customer service representatives. But this year the IRS projects only 43 percent of callers will get through to an agent after a wait of 30 minutes. That’s an average, notes National Taxpayer Advocate Nina E. Olson, in a January report to Congress. That means some days will be “truly abysmal,” she says.
3. We can’t handle the paperwork, either. In the same report, Olson estimates that 50 percent of letters to the IRS were not handled in a timely fashion. This year it will be worse, with 1.9 million fewer pieces of correspondence than last year dealt with in a timely basis — which means within about 45 days.
4. We’re worried about Obamacare collection. If you signed up for Obamacare and thought that was complicated, just wait until you file your taxes this year. If you got a subsidy based on your projected income, and you made more than that projection, you may have to pay back part of the subsidy. If you didn’t sign up for health care, you may be able to file for an exemption, or you could owe a small penalty. If you’re confused, you’re not alone.
5. Your refund may be delayed this year. Again, blame the budget cuts, says IRS Commissioner John Koskinen. He wrote a memo in January to employees warning them about a hiring freeze and possible two-day furlough later this year. He also mentioned that people who file paper returns could wait a week longer for their refund due to staffing shortages.
6. Scammers are having a field day with us. The IRS paid about $5.2 billion in fraudulent identity theft refunds during the 2013 filing season, the Government Accountability Office estimates. Separately, Americans are being bilked out of millions by con artists calling on the phone pretending to be IRS agents and demanding money.
7. We don’t collect about 20 percent of taxes owed. According to the IRS’ last study of the problem, the annual “tax gap” was $450 billion out of a total $2 trillion collected. The tax gap is money the IRS figures it is owed, but that wasn’t paid. Through enforcement it has gotten about $65 billion of that money back. Koskinen estimates the agency won’t be able to collect $2 billion in revenue due to reduced enforcement this year. Fact is, the IRS counts on people paying their taxes voluntarily.
8. We may be willing to negotiate what you owe. One upside to all the pressure on IRS employees is that you may find you can negotiate with your examiner if the IRS says you owe more money. Agents are under pressure to complete their examination in a timely manner, which, just like the legal system, can lead to quick settlements. Consider asking for a delay, to pay in installments, or just to get the amount you owe reduced. Acceptable reasons for reductions can include that you don’t have the money or that paying it would cause economic hardship.
9. Watch out for automated liens and levies. If you think the IRS is too strapped to catch a mistake, not true. The agency is highly automated and quick to send out letters based on basic math errors that show up in its system. You ignore those letters at your peril. Automated liens and levies may kick in before you’ve been able to make your case to an agent. With customer service getting worse, this is something tax advocate Olson worries about a lot.
10. You have an advocate. Feel like the IRS is giving you the bum’s rush? Try reaching out to the IRS Taxpayer Advocate Service for free help. You can call the toll-free number at 1-877-777-4778 or go to www.irs.gov/advocate.
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