A House Ways and Means Committee report Wednesday said decisions by Internal Revenue Service officials — not congressional budget cuts — hampered the federal tax agency’s ability to assist taxpayers this season.
“Spending decisions entirely under the IRS’s control led to 16 million fewer taxpayers receiving IRS assistance this filing season,” said the report, which was prepared by majority staff of the tax-writing House panel chaired by Rep. Paul Ryan, R-Wisc.
“Other spending choices, including prioritizing employee bonuses and union activity on the taxpayer’s dime, used up resources that otherwise could have been used to assist another 10 million taxpayers,” the report said.
Budget cuts that Congress has imposed on the IRS in recent years resulted in part from “waste and misconduct” at the tax agency, including nearly $50 million spent on employee conferences that critics say were extravagant and unnecessary. Congress has reduced IRS funding by $1.2 billion since 2010.
The IRS collects nearly $500 million in user fees each year, which it can then spend freely without congressional approval.
However, instead of applying that money to its floundering customer service unit or to enforcement efforts, the tax agency chose to spend that money on “other priorities,” including more than $60 million in lavish employee bonuses and $23.5 million on union activities, the committee report said.
Despite the supposedly crippling cuts, the IRS was the federal government’s second-highest spender on union work in 2014.
IRS officials announced this year that they planned to conduct thousands fewer audits and that they would not pursue taxpayers who owed less than $1 million.
“The reasoning behind these public announcements is hard to understand; it is like a sheriff announcing that anyone driving under 85 miles per hour would not be pulled over,” the report said.
Although the tax agency has touted its success in implementing the Affordable Care Act, the report said the IRS was only able to reach “this supposed success by prioritizing ACA implementation over other activities, including core responsibilities like taxpayer assistance.”
IRS Commissioner John Koskinen has claimed his agency will lose $2 billion in uncollected revenue due to resource constraints.
But the IRS has ignored dozens of recommendations for ways to save money from the Government Accountability Office, the National Taxpayer advocate and its own inspector general.
For example, the agency handed out $17.7 billion in improper Earned Income Tax Credit payments last year alone, which is more than any other federal program except Medicare.
Other sources of waste included the IRS’s hiring of an outside law firm — Quinn Emanuel — to assist in its review of Microsoft, despite having an extensive in-house network of tax law experts and access to an additional team of tax attorneys at the Department of Justice.
Quinn Emanuel lawyers cost taxpayers roughly $1,000 per hour, the report found.
“Hiring Quinn Emanuel may violate Section 6103 of the Internal Revenue Code, which prohibits the sharing of confidential taxpayer return information,” the report said. “When the IRS hired Quinn Emanuel, it issued a temporary regulation to allow the law firm to see taxpayer return information and to take compelled testimony — in other words, interrogate Microsoft employees.”
