IRS chief: Customers hurt if agency’s budget cut

The IRS and other agencies have generally seen their funding levels cut by 1.5 percent in the early weeks of fiscal 2012, under a short-term spending measure set to expire in mid-November.

But after getting $12.1 billion in the 2011 fiscal year, the IRS would take a much bigger financial blow under Senate and House spending measures for the full fiscal year.

The House Appropriations Committee has approved $11.5 billion in IRS funding for 2012, while the full Senate Appropriations panel endorsed allocating $11.7 billion to the agency.

“The operational realities of the federal budget process do not allow us to wait for a final FY 2012 budget because if we did, we would not have enough time left in the year to make the spending cuts that could be required,” Shulman wrote, adding few details on exactly what cost-saving measures the agency had already taken.

Opponents to IRS budget cuts, including a union for Treasury employees, have noted that the agency has already shed jobs in recent years and argue that the proposed 2012 funding levels would mean the loss of thousands of more jobs.

But Republicans are unconvinced that increasing the IRS budget will lead to more robust tax collection efforts.

In his letter, Shulman also said the sorts of cuts currently on the table would force the IRS to radically roll back its customer service operations — to the point, he said, that roughly half of taxpayers who placed a phone call to the IRS would either hang up in disgust or otherwise see their call unanswered.

He added that agency responses to taxpayer letters would be delayed by as long as five months, and signaled that other unfunded issues — like battling offshore tax evasion — would have to receive less attention.

As for its collection efforts, Shulman said the proposed cuts could cost the Treasury roughly $4 billion a year, and that the agency would reduce audits and other attempts to retrieve unpaid taxes by 5 percent to 8 percent.

Shulman sent the letter to the top Republican and Democrat at Senate Finance and the Senate and House Appropriations subcommittees dealing with financial services, according to an IRS spokeswoman. The letter was also sent to the chairmen and ranking members of the House Ways and Means Committee and its Oversight subcommittee.