I wish everybody could see firsthand the IRS I see and have come to know and appreciate.
Those words from Internal Revenue Service (IRS) Commissioner John Koskinen perhaps offer the best summary of the Commissioner’s speech at the National Press Club on Thursday, March 24, 2016.
The speech – the third time, he noted, in the middle of tax season – focused on the function and future of the IRS. Noting that “the IRS is not anyone’s favorite government institution, and we will not win any popularity contests, especially in an election year,” the Commissioner went on to share that a recent poll indicated that 12% of taxpayers liked Russia’s Vladimir Putin better than the IRS. He followed up by saying, “I believe the public needs to have a clearer idea of how important the IRS is to the nation and to taxpayers.”
Koskinen praised IRS employees, saying that “in all my years of leading organizations in the public and private sectors, I can honestly say that no group of people I’ve worked with has been more dedicated to their mission than the employees at the IRS.” Those employees, he says, carry out the IRS’ most important job each year: delivering a smooth filing season. To do that, Koskinen says, is complicated.
So far this filing season, the IRS has already received more than 80 million individual income tax returns. The tax agency expects to process 150 million individual income tax returns this year. Of those, over 65 million taxpayers were issued refunds for a total of almost $190 billion. That is, says Koskinen, real money going back into the economy or into people’s savings.
In addition to processing returns, Koskinen noted that the IRS spends about 40% of its budget helping taxpayers both in person and with technology. This tax season, for example, the IRS counted 248 million hits on the IRS website, IRS.gov. The agency has also answered more than eight million calls from taxpayers during the filing season.
Of course, the IRS is best known as the nation’s tax collector. According to Koskinen, the IRS brings in about 92% of all federal revenue, collecting about $50 billion to $60 billion through enforcement activities and $3.3 trillion in voluntary compliance. By the numbers, the IRS collects $100 in federal revenue for every 35 cents in costs, a return on investment Koskinen called “a pretty good deal for the American people.” That level of efficiency is better than most countries, says Koskinen, citing statistics from the Organization for Economic Cooperation and Development which indicate that the average OECD member country, including Germany, France, the United Kingdom, Canada and Australia, spends almost twice as much as the U.S. to collect each dollar of revenue.
Commissioner Koskinen says that, with more funding, the agency could do more. Estimates indicate that the agency could bring in $64 billion in taxes owed over the next ten years, or about $6 billion a year. Currently, however, the IRS is still struggling with cuts to the agency dating back to 2010. The IRS budget for this fiscal year is about $900 million below the budget for 2010. The IRS has largely absorbed the cuts by not replacing employees who leave. This has not only impacted service to taxpayers but has also impacted audit rates, collection efforts, and investigations into tax-related crimes.
Restoring IRS funding levels, says Koskinen, would be good for taxpayers. Recent additional funding granted by Congress in December was used to improve taxpayer service, strengthen cybersecurity and fight identity theft. The IRS used the funds in part to add 1,000 temporary employees this tax season. The result? The IRS is answering the phones over 70% of the time so far – much better than last year.
Hiring more full-time workers is important, says Koskinen. Estimates indicate that more than 40% of the IRS workforce will be able to retire by 2019. There are few younger employees waiting in the wings: out of an 85,000 person workforce, the IRS has only 200 employees who are 25 or younger.
Modernization of the agency also requires funding. With modernization, Koskinen says the IRS can generate faster refunds, notices and account updates. With e-File, for example, the IRS can process tax electronically filed returns faster. How quickly? On the IRS’ busiest day earlier this filing season, the systems accepted 4.4 million tax returns in one day. That’s nearly 450,000 returns accepted in one hour, or 125 returns every second. Modernization can also help keep that data safe.
With adequate funding, said Koskinen, the IRS “will be able to do an even better job of helping people meet their tax obligations quickly and easily.”
After his remarks, the Commissioner took questions from the audience. The first question focused on the IRS tax-exempt scandal and how the IRS is moving forward. Koskinen pointed out that the entire Chain of Command involved in the scandal is gone (from top to bottom). Remember that the BOLO lists and other scrutiny began in 2010 while Doug Shulman was at the helm; when Shulman left at the end of his term, he was followed by acting Commissioners Steve Miller and Danny Werfel (for a timeline of the scandal, click here).
Koskinen mostly demurred on the question of whether he supported a flat tax, noting that “tax policy is the domain of Congress.” The IRS, he reminded the audience, merely carries out tax administration. He fielded a related question by noting that efforts to abolish the IRS are largely driven by frustration since taxpayers spend more than 6 billion hours collectively to file taxes each year. However, abolishing the IRS isn’t so simple: some level of government involvement would be required for collection and administration.
Finally, the important stuff: Koskinen, a Duke undergrad and a Yale grad, was asked who he had been rooting for during the Duke/Yale game (Yale fell to Duke). The Commissioner diplomatically praised Yale’s year while touting Duke’s chances moving forward. Duke lost to Oregon later that day.
You can read the Commissioner’s speech in its entirety here.
