It may be a government entity, but the Internal Revenue Service is a business of sort. As such, just like any business, when sales are down, it sometimes means closing the least productive locations. Frankfurt, London and Paris are the last of the IRS’s taxpayer-assistance centers overseas and due to budget cuts will be shut down this year.
For U.S. citizens that live abroad or travel overseas, having these remote IRS offices in place has been popular for decades. They have been staffed with employees in consulates and embassies with the sole purpose of assisting American expatriates with tax issues.
These offices have also been responsible for inspecting any U.S. company with foreign operations for possible civil violations of tax code. There were over a dozen of these staffed offices in 1993 and by 2013, there were only four offices left and the Bejing office was closed in November 2013.
By closing the last three offices, the IRS will save as much as $4 million annually. The remaining 12 or so employees affected by these closing will be reassigned accordingly to the domestic offices of the IRS. John Koskinen, IRS Commissioner has stated that workforce reductions in offices and staff will most likely cause taxpayers a delay in getting their refund checks this year.
IRS spokeswoman Julianne Breitbeil was quoted as saying “After budget reductions over the last four consecutive years, the IRS is forced to make tough choices during this period of fiscal austerity and these closures have relatively little impact on taxpayers and treaty partners.”
The Advancement of Communications to Blame for the Worst Tax Season
With today’s technology, the advancement of communications has made these IRS offices expendable according to IRS officials. IRS employees based in the U.S. can easily assist any U.S. taxpayer that is living or traveling abroad. This has made it more economical in handling cases of criminal tax fraud allegations and subsequent investigations. However, the IRS Criminal Investigation unit is not being affected by these closings and cutbacks.
The recent budget cuts in the IRS have already hindered the organization’s ability to enforce the U.S. tax codes. Now with these closings and more cutbacks, union officials warn that the U.S. Treasury will suffer even more loss in revenue. The National Treasury Employees Union President, Colleen M. Kelly was quoted as saying, “Tax cheats will find it easier to evade paying what they owe.”
Just as many businesses have, The IRS has been assigned additional duties and has still been a victim of funding cuts. With a reduced staff of 83,000, down by 11,000 last year, the budget given to the IRS is $1.2 billion dollars less for 2015 compared to 2010. In addition to the financial side, the IRS is also now responsible of overseeing the administration of the Affordable Care Act.
There are over 6 million Americans living abroad today who are required to file with the IRS. Unlike other countries, when American citizens earn money overseas, they are required to pay taxes on anything over $100,800. However, credit is given to those American taxpayers who pay taxes to other countries.
With less money to work with as well as less staff for the IRS, experts are expecting the worst tax season in years. As such, experts warn that this year will be hard on both the IRS staff and even the taxpayers. A national advocate of taxpayers, Nina Olson, expressed her concerns that this could be as bad as or even worse than a computer failure, delayed refunds or lost returns. The last year that could be mentioned in comparison is 1985 and Ms. Olson fears that this year will be even more disastrous.
What is causing this concern by experts like Ms. Olson? Over the past 5 years, Congress has cut the IRS budget and increased their duties. In addition of the 10% cut between 2010 and this year, like any business, the IRS has seen an increase in operating as well. Incorporate all with the fact that the IRS has less personnel and less budget for training staff.
While the IRS is being subject to budget cut and a drop in staff, there are approximately 7 million more taxpayers according to John Koskenen, the IRS Commissioner. With more taxpayers, less tax personnel and less budget, what can we expect? American taxpayers can most likely expect less customer service and delayed refunds.
Just how much less customer service? Olson estimates that almost 50% of all the incoming calls the IRS gets won’t be answered. Those who do get through will probably have wait times of over 30 minutes if they require human interaction. Even tax preparers are expected to have a wait of 50 minutes or more through “priority service” line.
Mr. Koskinen has said that that even though the organization is hamstrung, they will do all they can do keep a smooth running process. He does admit thought that even by maximizing all the resources made available to them, that between January and May, “…it is still going to be miserable.”
Should that misery include refunds being delayed, which is possible, he knows that American’s are not going to be happy. Even though it will be noticeable that the IRS is under the gun and there is dysfunction visible upfront. With this being the first tax season for the IRS to oversee administering the premium tax credits and individual mandates, it is expected to burden what staff there is in place.
It is not uncommon for the first time at anything to not go smoothly. However, the matter of Obamacare and all that is encompassed by it have officials expecting that any hiccup will be loudly broadcasted by those who oppose it already. Olson is concerned that insurance exchanges won’t send accurate information to the IRS. As Ms. Olson was quoted as saying, “The IRS will probably get blamed for a lot of things that it is not responsible for, and that will not do well on the Hill as we try to make our case for additional funding.”
What do you think about closing of the IRS centers abroad?