Good News or Bad News? IRS Budget Cuts On The Horizon

June 21, 2017
 

Less chance of the IRS coming to knock on your door? Sounds like a good thing, right?

President Trump has proposed a $239-million cut to the Internal Revenue Service’s budget. This could mean, among other things, reduced personnel for performing enforcement functions such as auditing taxpayers. This seems like cause for celebration to many. On the other hand, is reduced government funding good for all of us? Some things to consider:

  • The IRS is a top producer for the government, bringing in $300 for every $1 it spends, points out the DC Report. With the current administration’s stated goal to run the government in a more “businesslike” fashion, this seems like a counterproductive move–Reporter Vic Simon calls it “as un-businesslike as you can get” to cut down resources that contribute to revenue.
  • A decrease in enforcement might result in fewer audits of law-abiding taxpayers, but it will also result in less collection of tax legitimately owed, funds the government needs to fight the increasing deficit, and it will increase the burden on those who do pay their taxes.
  • It’s a safe bet that one of the first things to go will be taxpayer services. The IRS is already severely understaffed, with a decrease in personnel of “almost 30% over the last number of years,” Treasury Secretary Steven Mnuchin told the LA Times.  “While taxpayers waited an average of 10.8 minutes when they called the IRS seven years ago, that wait had grown to nearly 17 minutes in 2014,” TIME says. Alan Rappeport of the New York Times adds, “Last year, it took nearly 20 minutes to navigate a maze of automation and hold times to reach someone.” Sound familiar?
  • Security might also become an issue. With cyber-threats on the rise, the IRS needs the resources to keep taxpayers’ information protected, points out Rappeport.

Perhaps some taxpayers can breathe easier, knowing that their filing errors or accidental over-deductions are unlikely to be examined closely anytime soon. However, a major budget cut to the IRS will have consequences that reach far beyond a little tax fudging.

What do you think? Is this good news or bad news? Feel free to let me know what you think, and of course, reach out to me anytime if you need help making sure that the IRS’ eye won’t fall on you!