70 Million Tax Returns Received for 2012
The IRS has already received more than 70 million tax returns for the 2012 filing season, testified IRS Commissioner Douglas H. Shulman on March 22, at a hearing of the House Ways and Means Oversight Subcommittee. The IRS has thus far issued 59.2 million refunds totaling $174 billion. By comparison, the figure from this time in 2011 was 59 million refunds issued, totaling $178 billion. The average dollar refund for 2012 is around $3,000, roughly the same as in 2011.
In general, Shulman stated that the IRS brought in high returns on the government's investment and cited the estimated figure of $200 generated in revenue for every $1 spent on the IRS's budget. As such, he urged that the subcommittee support the President's fiscal year (FY) 2013 budget request for the IRS, which totaled approximately $12.76 billion.
IRS phone service
Following his opening testimony, Shulman fielded questions from subcommittee members on the effectiveness of IRS phone service, the cost of creating the proposed real-time tax system, policing erroneous claims for education tax credits, and the IRS's handling of political organizations applying for tax-exempt status. Shulman stated that in numerous instances, a budget increase or other action by Congress would help the IRS to become more effective in these areas.
For example, Shulman stated that during the 2011 filing season, the IRS had been able to deliver 70 percent phone service, meaning that 70 percent of callers were able to reach an IRS representative. This filing season, phone service had dropped to 66 percent. In the meantime, the total phone call volume has increased by 34 percent, with taxpayers facing an average wait time of between 17 and 18 minutes. "It is not uncommon to be on hold for 30 minutes," said Rep. Lynn Jenkins, R-Kan.
Ranking subcommittee member John Lewis, D-Ga., asked Shulman about the effect of the $305 million cut to the IRS's budget for FY 2012 on phone service and other operations. Shulman replied that phone service is critical for maintaining and improving voluntary compliance, as many of the calls are related to setting up a payment plan, questions on whether a taxpayer qualifies for a deduction or credit, or other important issues. He stated that the budget is linked to provision of the resources necessary to maintain IRS operations.
Shulman stated he is "quite hopeful" concerning the president's budget request, noting that there should be bipartisan support for it since the increase had been proposed in 2006 during the Bush administration. He reiterated that the proposal "reflects the administration's belief that prudent investments in the IRS are good for the deficit."
Real-time tax system
Rep. Erik Paulson, R-Minn., questioned Shulman regarding the cost of developing and implementing a real-time tax system to enable the IRS to correct tax returns as soon as they are filed, rather than years in the future when taxpayers have lost records or forgotten the details surrounding the income items in question. Paulson expressed his concern that the cost would outweigh the benefits.
Shulman stated that taxpayers today have expectations regarding technological advances. He added that a real-time tax system would save time and money for taxpayers. For example, a tax return often comes under audit several years after its filing, at which point the taxpayer has already spent the tax refund. For now however, the system is only in its conceptual stages and, therefore, Shulman is unable to assign an exact cost. He promised more interaction with Congress in the future. "For sure we will have public proposals. We will have plenty of time for interaction," he said.
Math error authority
Shulman also answered questions from Rep. Diane Black, R-Tenn., on how the subcommittee or Congress as a whole could help the IRS stop accepting erroneously claimed education tax credits. Black also criticized the delivery of tax credits to prisoners.
According to Shulman, the IRS would be able to block the education credits if it had math error authority, or the ability to deny a credit if agents suspected a claim. He also requested that Congress reauthorize the IRS's ability to share information and dialogue with prisons concerning their inmates.
501(c)(4) political organizations
Finally, Shulman responded to questions from Subcommittee Chairman Charles Boustany, R-La., on the IRS's scrutiny of political organizations that have applied for tax-exempt status under Code Sec. 501(c)(4). The IRS has recently received criticism that its examinations of certain political organizations showed signs of partisanship.
Shulman explained that political organizations were not required to apply for tax-exempt status under Code Sec. 501(c)(4). They could hold themselves out as Code Sec. 501(c)(4) organizations, and then file a Form 990. However, the organizations that apply for status invite questions from the IRS. The three examiners in charge of applications are selected to eschew partisanship. They are all professional experts and live outside of the District of Columbia. "We pride ourselves on being a nonpartisan, nonpolitical organization," said Shulman.
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