As the US government heads into the new year, the part of Uncle Sam that gives you a tax refund, audits you or your business, or takes a piece of your pie in the form of a tax bill will have a smaller budget to do its job.
The IRS’s budget it getting slashed by $346 million, but the consequences are too early to tell. However, the results could be a mixed bag.
IRS Commissioner John Koskinen recently said that the budget cuts could lead to tax refunds being delayed. Refunds are usually doled out within three weeks if you file electronically, which is the fastest way to get them.
But with fewer staffers to process all the returns, Koskinen indicated delays are a real possibility. That could lead to maybe a bit of reduced economic activity in the weeks after tax filing season begins, which typically begins in mid-January.
Another way Koskinen indicated IRS budget cuts will impact taxpayers is by having to take a few its tax cops off the beat.
The budget cuts mean that there could be fewer IRS agents auditing tax returns and enforcing the tax code. Some people may be able to cut corners on their taxes and claim questionable tax write-offs, but the extent that the budget cuts enable tax cheating remains to be seen.
But if you think the IRS will have a tougher time pursuing back tax debt, you’re probably wrong. The prosecutors with the IRS’s Criminal Investigation division have an overall conviction rate of 93 percent. Also, 2014’s number of investigations exceeded 2013’s by more than ten percent.
So if you think you’ll be able to run away from an IRS bank levy or wage garnishment, keep dreaming. The IRS has been working on a reduced budget for years. It’s 2010 budget was $1.2 bigger than it is now, and it’s having wildly successful criminal conviction rates for pursuing tax cheats.
But the big impact people will see will be on their tax returns.
The IRS budget is the same that the agency received in 1998, adjusted for inflation. But back in 1998, there were 30 million fewer tax returns to process. If it had its 2010 budget of $12.1 billion, tax returns probably would be hitting taxpayers’ bank accounts just weeks after the ‘submit’ button is clicked on your home computer screen. But those days or probably long gone.
As the IRS moves from trimming the fat to cutting into the muscle, the impact on its ability to go after people with back tax debt probably won’t be too large. Tax returns will likely be delayed and inconvenient, but don’t think that claiming that shady tax deduction will pay off. If its conviction rate is any indication, the IRS will keep diligently using wage garnishments and bank levies to go after back tax debt.
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