Report: IRS Deliberately Cut Customer Service Funding

A new report from the House Ways and Means Committee says that the IRS deliberately cut funding to taxpayer services, resulting in increased wait times for customers, more delays in paying tax refunds, and other customer service problems.

A new report from the House Ways and Means Committee says that the IRS deliberately diverted $134 million in financial resources away from taxpayer services while blaming poor customer service on a budget crisis.

The report acknowledges that the IRS has been hit with budget cuts in recent years. These were made partly in response to wasteful spending at the agency on items such as $50 million on employee conferences and $60,000 on a Star Trek parody video. Congress also made the cuts in response to reports that the agency was targeting organizations for political reasons.

Despite these budget cuts, however, the report says that the IRS could have provided the required levels of service to its customers, but instead cut discretionary funding for taxpayer services, presumably in an attempt to get Congress to increase the agency’s budget.

The report listed some examples of these spending decisions by the IRS. Among them were the following:

  • Allocation of customer service funding – The IRS receives $500 million annually in user fees that it can spend at its own discretion. In 2014, the agency spent $183 million of these fees on customer service activities but only plans to spend $49 million in 2015.
  • Employee bonuses – The report says that the IRS continued to hand out bonuses to its employees against guidance from the Office of Management and Budget. The IRS paid $62.5 million in bonuses in 2013 and $60 million in 2014.
  • Official time for union activity – The IRS reported that employees used 521,725 hours for union activity in fiscal year 2013, which accounted for an estimated $23.5 million in salary and benefits expenses. In fiscal year 2014, the IRS recorded 491,948 hours of union time, and another $23.5 million in salary and benefits expenses. According to the report, eliminating discretionary union time could save the IRS $20.7 million per year.
  • Use of private debt collectors – The IRS had the authority to use private debt collectors to collect against $120 billion of unpaid taxes, and the Treasury Department had recommend that the IRS do this. A pilot program for using the private collectors was launched in 2006 but then terminated in 2009. According to the report, this decision cost the IRS as much as $100 million that could have gone to its enforcement budget.

Speaking on the report, House Ways and Means Committee Chairman Paul Ryan (R-WI) said, “These findings are deeply troubling. At all times, but especially during tax season, the IRS should put the taxpayer first. But instead, the agency cut funding for the very customer service that taxpayers rely on. The IRS has a lot to answer for, and the Ways and Means Committee is going to hold it accountable.”

The full report, Doing Less With Less: IRS’s Spending Decisions Harm Taxpayers, is included below.

Doing Less With Less: IRS’s Spending Decisions Harm Taxpayers

About the Author

Ian Smith is one of the co-founders of He has over 20 years of combined experience in media and government services, having worked at two government contracting firms and an online news and web development company prior to his current role at FedSmith.