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The Tax Practice of IIT Chicago-Kent College of Law
The Tax Practice of IIT Chicago-Kent College of Law

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Are Less IRS Audits and IRS Collections Bad For Taxpayers?

Posted on in Tax Rants

It has recently been reported that the massive, 1.2 billion dollar IRS budget cut has resulted in an employee hiring freeze, job reductions, threatened worker furloughs and an overall drop in taxpayer services, as well as the number of new IRS audits reaching historical lows.  The question of the hour, though, is whether this is something that will play out favorably for taxpayers, or will it work to their detriment?

The initial, and perhaps simplistic, analysis is that less audits means less chance of a taxpayer getting caught understating his liabilities.  Less repo men means less tax levies and other enforced collection activities against taxpayers who have past due balances.  Less employees means less harassment.  less phone calls, less site visits, less personalized attention.

All true.

But the examination and collection machine will certainly not stop.  Existing IRS employees will be forced to do more with less, and will no doubt experience more stress doing it.  Morale that plunged in October of 2013 when the federal government shut down and IRS employees were sent home from work for a week will pale when compared to the new depths it could reach as the effects of the cutbacks trickle down to the agents charged with enforcing the revenue laws in a more intense, resource-deprived environment.

Over the last several months our clinic has absolutely experienced a marked increase in Holtsville Examiner’s hostility to offers in compromise, less flexibility in Revenue Officer’s willingness to accommodate short term financial hardships, and significantly more scrutiny of IRS Chief Counsel docket attorney settlements by their managers.  Am I merely stitching together isolated cases to form a pattern that doesn’t really exist, connecting random dots to elucidate trends only in my overly-sensitive mind?  Or is this all the harbinger of worse things to come, the byproduct of severe budget pruning and the attendant manifest of tumbling employee esteem?

Only time will tell, I suppose.  But I really don’t think this is a good thing.  Not for taxpayers, not for their representatives.  Like scared animals with their backs up against the wall, IRS employees that are over-extended, fragile and stressed-out will not make rational decisions.  They will be less inclined to consider taxpayer explanations objectively, or to treat taxpayers with understanding and empathy.   In their crush to close cases, they will be more and more predisposed to unthinkingly rely on that old stand-by – "I know its not fair, but that’s what the manual says"; so much easier than their taking precious time to exercise any inherent discretion they possess to adapt the rules to a taxpayer’s particular condition and circumstances.

We certainly need to do something about out-of-control government spending.  But depriving the tax collector of the tools and personnel it needs to do its job efficiently and compassionately is an extremely shortsighted and ineffectual remedy to our bloated federal bureaucracy.

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