President Obama signed the spending law that allocated $10.9 billion to the IRS for the fiscal year ending September 30, 2015. This may seem like a staggering figure, but it is actually 3% less than what the IRS received in 2014 and 12% lower than the requested budget. The IRS has already said the agency is only hiring one employee for every five employees that leave. This new budget cut will exacerbate the staffing shortage issue that has been plaguing the IRS in recent years.
So what does this mean for taxpayers and preparers? Well, for starters, it will be even more challenging to reach the IRS by phone, especially during busy season. I called the IRS to discuss client matters three times this past week, and, each time, I was kept on hold for a minimum of 45 minutes! And this is slow period for the IRS. Come February and March, we will see hold times well over two hours, that is, if anyone even picks up at all. This budget cut also means that there are fewer employees tasked with reviewing a growing number of tax returns. Not to mention the IRS has already assigned part of its audit workforce to handle all the new issues that will arise from the Affordable Care Act. The amount of returns audited by the IRS already hit an all-time low last year (less than 1% of 1040s) and will most likely dip below that figure if this hiring trend continues. On top of that, we should expect refunds to take slightly longer than usual to be processed and accepted. The IRS simply does not have the manpower to handle the Affordable Care Act and audit as many returns as past years, while simultaneously answering thousands of taxpayer and preparer questions on a daily basis.