Can IRS Collect Obamacare Taxes When It Can’t Handle Tax Complaints?
Policy + Politics

Can IRS Collect Obamacare Taxes When It Can’t Handle Tax Complaints?

The Internal Revenue Service is on the hot seat again as federal auditors blast the agency for not responding to taxpayer complaints in a timely manner.

The latest report from the Treasury Inspector General for Tax Administration (TIGTA) reveals that between 2012 and 2013, the IRS failed to address at least 47 percent of complaints filed against tax preparers. The report also said that another 49 percent of the complaints sat unaddressed for at least two months.

Related: How the IRS is Botching Obamacare Tax Collection

This is significant auditors said because “the burden on taxpayers can include receiving an incorrect refund amount or even owing the IRS penalties and interest.”

There’s even more at stake than delays in handling complaints. This is the second scathing report in less than a month to question the agency’s productivity and work quality. In August, the Treasury Inspector General for Tax Administration said the IRS was struggling to collect a new tax that’s critical to financing the president’s health care law; auditors say the IRS’s flawed collecting process is allowing it to raise only three-quarters or so of the revenue that was originally expected.

The IRS had originally estimated that the tax would bring in about $1.2 billion in the second and third quarters of 2013 – but it’s only received $913.4 million.

The IG’s findings, suggesting that the IRS is not meeting its expectations and completing its work, come just as the agency is taking on even more responsibilities under Obamacare.

Related: Obamacare’s Next Challenge: IRS Verification

The agency is tasked with enforcing more than 40 new provisions under the health law, including distributing insurance premium tax credits to help low and middle income people purchase health insurance through the state and federal exchanges.

IRS also will impose penalties on individuals who decline to purchase health coverage as well as medium to large employers (in 2015) who fail to provide coverage to their full-time employees.

IRS Commissioner John Koskinen has continuously warned lawmakers that the agency’s work may suffer if it does not receive an increase in funding to cover these new responsibilities.

In June, Koskinen warned an audience at the IRS Nationwide Tax Forum in Chicago, that budget cuts would hinder the agency’s ability to serve taxpayers, Politico reported. He said if the agency doesn’t receive proper funding, the level of phone service to help respond to taxpayer questions would drop to 53 percent.

“If we don’t receive the funding and we can’t do the hiring needed to handle this call volume, we estimate our level of phone service next year would plunge to 53 percent, which would be the lowest since 2008,” Koskinen said. “At 53 percent, that would mean close to half of those trying to get our help over the phone would not get through.”

Separately, he told lawmakers in Congressional Testimony that he was “deeply concerned about the ability of the IRS to continue to fulfill its mission if the agency lacks adequate funding,” Koskinen said. “Our current level of funding is clearly less than what the agency needs, especially to provide the level of taxpayer services the public has a right to expect.”

Under the $1.1 trillion omnibus budget passed this year, the IRS was allocated $11.2 billion –down from $12 billion the previous year—this was the fourth year in a row it saw its budget cut. Koskinen and other IRS officials had warned Congress that the budget cuts would put a significant strain on their ability to do their job.

However, lawmakers—especially House Republicans—were eager to cut the agency’s budget after last year’s scandal involving the alleged targeting of conservative groups, on top of IG reports revealing that the agency had spent tens of millions of dollars on lavish conferences.

“The IRS has been targeting American taxpayers, as we’ve learned, for their political beliefs for the last four or five years,” Rep. Bill Huizenga (R-MI) said in a statement after proposing to cut the IRS’s tax enforcement budget by $788 million this year. “Now this culture within the IRS has grown to one of stonewalling, double-talk and mistrust. It’s up to Congress to use the power of the purse… to rein in the IRS and force them to conduct their analysis in an unbiased manner.”

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