Attention FAE Customers:
Please be aware that NASBA credits are awarded based on whether the events are webcast or in-person, as well as on the number of CPE credits.
Please check the event registration page to see if NASBA credits are being awarded for the programs you select.

GAO Says Staffing Shortages Mean IRS Cannot Effectively Enforce Tax Law

Chris Gaetano
Published Date:
Mar 27, 2019
business-businessmen-classroom-267507 (1)

In a recent report, the Government Accountability Office said that, without more staff, the IRS cannot properly enforce the tax laws, which has led to billions of dollars of unpaid taxes every year. The GAO noted that, between fiscal years 2011 and 2018, the IRS's budget has declined by 15.7 percent ($2.1 billion), which has hobbled its ability to enforce existing tax laws and implement new ones, like the Affordable Care Act or the Foreign Account Tax Compliance Act. The GAO added that these staffing shortages have also affected the IRS's ability to defend against identity theft and fraud. Beyond just being short-handed at the office, the GAO said that is the result of key skill gaps that have been left behind as the workforce shrank alongside its budget. 

Budget cuts were also found to have affected employee morale and turnover: a FY 2016 internal survey found that 32 percent of separating employees indicated poor office morale as a strong factor in their decision to leave. 

The report noted that, prior to the budget cuts than began in 2011, the IRS would conduct agency-wide strategic workforce planning efforts, but since then, resource constraints have reduced the agency's the human capital function to mainly completing transactions like retirement and benefit processing, meeting legal compliance activities, and facilitating the hiring of seasonal workers. While such efforts continued at the division and program level, these were only performed to the extent of the time and resources available. As a result, the quality of key human capital activities was uneven across the agency, if performed at all. The GAO said this has put the IRS at increased risk of unnecessary duplication of HR activities, redundancies in human capital systems, and failure to effectively identify and retain personnel with critical skills and experience across the agency. 

While the IRS tried to develop an agency-wide strategic workforce plan in 2016, its implementation has encountered significant delays. While the IRS initially said that full implementation would be complete by June 2018, the agency now cannot give an estimated completion date anymore. The report noted that the first phase hasn't even been completed,; the IRS needed to pause it until after the opening of the 2020 tax season. This has been because, first, implementing the Tax Cuts and Jobs Act took away time and resources; second, the IRS lacks the training and resources to implement the plan; and third, the Treasury Department overall is developing an Integrated Talent Management system and the IRS wants to wait until it is completed before moving on. 

The GAO made seven recommendations, six to the IRS and one to Treasury: 

* Actually implement the workforce planning initiative
* Have the secretary of Treasury provide clarifying guidance to the IRS regarding the  Integrated Talent Management system, including when it will actually be deployed and available for use
* Improve reporting for progress on the workforce planning initiative. 
* Have regular reports on efforts to close critical skill gaps among revenue agents, including lessons learned, that may help inform strategies for conducting skill gap assessment efforts for other mission-critical occupations. 
* Ensure the Human Capital Officer and Deputy Commissioner for Services and Enforcement collaborate to develop a work plan or other mechanism that prioritizes and schedules skills assessments for mission critical occupations at highest risk of skills gaps
* Direct the Human Capital Officer to measure the extent to which each of its activities for improving hiring capacity are effective in producing desired hiring capacity outcomes
* Direct the Human Capital Officer and Chief Financial Officer to issue clarifying guidance on the current Exception Hiring Process, including clarifying areas where hiring limitations that were used in previous years are no longer applicable

The GAO report echoes what many have been saying about how ongoing staffing shortages have negatively impacted its enforcement capabilities, and how this has changed the IRS. Individual audit rates, for example, have reached lows not seen since 2002 because there are fewer auditors than there were before. Beyond the actual number of audits, it has also affected who gets audited: enforcement actions against wealthy individuals and large corporations, which require more resources to audit, have dropped in favor of middle and lower income taxpayers.

Staffing shortages have also affected the IRS's Criminal Investigation Division, as the number of criminal cases it pursues has dropped 11 percent over the past year, mainly due to staffing shortages, having lost 21 percent of of its agents since 2011. As the IRS has fewer agents to work with, it has had to become more selective about the cases it pursues, which necessarily means fewer cases will be opened in the first place. Between this year and last year the Criminal Investigation Division opened 376 fewer cases and recommended 510 fewer prosecutions. Identity theft cases in particular have plummeted over the years, with 2017 seeing only 374 such cases being opened, versus 1,492 in 2013, when they peaked. 

Click here to see more of the latest news from the NYSSCPA.