IRS Budget Cut Will Hamper Agency’s Enforcement Effort

by Leroy Baker, Tax-News.com, New York

30 September 2004

Internal Revenue Service Commissioner Mark Everson, has warned that proposed cuts in his agency's fiscal year 2005 budget request would reverse progress made in key tax enforcement areas in recent years.

"The $382 million reduction in funding proposed by the House Committee would jeopardize the enforcement initiatives in the (2005 budget) request and would substantially reduce our ability to hire an additional 4,100 enforcement personnel," Everson warned in a letter to Senator Max Baucus, the ranking Democrat on the Finance Committee.

According to Everson, the budget cut would put at risk 229 major corporate fraud investigations and stymie plans for significant increases in audit rates of both small and large business taxpayers.

The IRS chief stated that the proposed cuts could also lead to a shortfall of over $80 million in funding needed to cover the salaries for enforcement personnel hired by the agency in fiscal year 2004.

"Although the IRS will attempt to minimize the impact of this $80 million shortfall through further cost cutting, we likely would have to freeze hiring and not be able to cover employee losses in our service and enforcement areas, which would result in a net reduction in IRS staffing," he noted.

Everson was responding to concerns from Senator Baucus that the cuts may have a detrimental effect on the closure of the ‘tax gap’ between what is owed and what is paid to the IRS, estimated at an annual figure of $311 billion.

"Congress must provide the IRS with the support and tools to enforce the tax code. Failure to do so will jeopardize the agency’s ability to stem non-compliance through enforcement and taxpayer service,” Baucus commented in a statement.

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