The Internal Revenue Service (IRS) has had a turbulent year with cuts in funding, but they have not lost the procedural power invested in them to do such things as withhold a United States citizen’s passport for unpaid taxes. As April 15th rapidly approaches, some are frantically collecting paperwork in order to beat the tax-filing deadline, while others are filing for extensions. Either way, some are arguing the U.S. tax system is in need of changes in view of last year’s experience by the tax service.
On Wednesday, at a Tax Policy Center forum, Commissioner John Koskinen attacked the IRS for the manner in which they are reacting to the Congressional-imposed budget cuts. He stated that, “[w]e’re coming to the point where the significant reduction in the IRS budget will degrade the agency’s ability to continue to deliver on its mission… People need to understand the IRS is going to have to do less with more.”
The current IRS budget is the equivalent that it had for spending in 1998. This year, they were only able to audit one percent of partnerships, six out of every ten individuals who called the IRS were never able to reach an actual agent, and the average wait time for those who did get through was twenty-two minutes. Forbes has noted that the inability to fulfill their duties is, “becoming an increasing toxic environment for tax administration.”
If the IRS is unable to enforce tax compliance it could mean less voluntary filings and that taxpayers will not get help with taxes and this could lead to accidental fraudulent tax filings. Also, notice of lower rates of audit may encourage tax-avoidance on behalf of savoy filers, and if security measures diminish, identify theft grows as a concern. However, it has been noted that the current system is so old that most modern hackers are not familiar with it, so security is fine for the time being.
A solution to aid in maintaining IRS procedural efficiency is to implement mechanisms to ensure compliance. One of these could be withholding passports of those who owe over a certain amount. When obtaining a passport, four items from the form are sent from the Department of State to the IRS, and if they are not provided, the tax agency may impose a $500 fine upon the applicant. They are the applicant’s full name, their address, their tax ID number, and their date of birth. With this information, the agency can place a hold on a passport until the owed amount is paid.
Another proposed method of increasing efficiency is creating a database where each citizen has their own IRS page where they can go to file taxes and make payments. This seems very practical, but it does have a couple of issues. As previously mentioned, the current system is secure due to its aging system, and due to the agencies common usage of “snail mail.” A new system may allow more information to be compromised and many who do not have Internet will not use it.
The IRS is taking new measures such as withholding passports of those who owe taxes in an effort to compensate for budget cuts imposed by Congress. April 15th marks the final day to file taxes, but for the many who have filed extensions, these will give them a chance to collect their documents. Documents like the Schedule K-1, which is used for partnerships that may not come until summer, but it also means that the IRS, on its limits budget, is working overtime.
By Joel Wickwire
Photo by Mike – Flickr License
Photo by Lendingmemo – Flickr License