IRS needs more money

The Internal Revenue Service Oversight Board has taken the unusual step of submitting its own IRS budget to Congress. In asking for $500 million more than the Bush administration requested in its fiscal 2005 budget for the agency, the board included greater spending increases for information technology.

Members of the board, an independent group that advises the agency on taxpayer service, said the additional money would keep the IRS' modernization project on track and fund efforts to enforce tax payments.

In its fiscal 2005 budget for the IRS, the administration requested $1.9 billion for IT. That included $1.6 billion for information systems, a 3.8 percent increase from fiscal 2004, and $285 million for the modernization, a 26.5 percent decrease from fiscal 2004.

The oversight board's budget, however, seeks $2.1 billion for IT, including $1.7 billion for information systems, an 8 percent increase from fiscal 2004, and $400 million for the modernization, a 3.1 percent increase from fiscal 2004.

Nancy Killefer, the board's chairwoman, told lawmakers that not spending the money necessary to strengthen the IRS at a time when noncompliance has created what is estimated to be a $311 billion tax gap would be shortsighted. That is the amount of taxes officials believe Americans owe the IRS, Killefer said in her testimony last month before the House Ways and Means Committee's Oversight Subcommittee.

"Now is a critical time for our tax system to be strengthened, not merely maintained at current levels," she said. Service to taxpayers has improved in the five years since the board was created, she said, thanks in large part to a growing number of self-service Web applications and online services for tax practitioners.

Compared with Bush's proposed budget, the board's proposal for systems modernization is not punitive but instead "sets the foundation for genuine progress for the program in fiscal 2005," Killefer said.

But Subcommittee Chairman Amo Houghton (R-N.Y.) said the president's budget request for the IRS was already generous compared with amounts requested for other civilian agencies. "You have

$10.7 billion," he said. "Why can't you work something that you think is important within that overall figure?"

James White, director of tax issues at the General Accounting Office, told subcommittee members that in addition to hiring more enforcement officers, achieving greater payment compliance is closely linked to modernizing IRS tax-processing systems and expanding electronic filing.

White suggested that modernizing systems and promoting e-filing would eventually improve operational efficiency enough to pay for service improvements and enhanced enforcement efforts without significant budget increases.