Oversight board pushes for more money for IRS

The Internal Revenue Service Oversight Board took the unusual step this week of submitting its own budget to Congress. In asking for $500 million more than the Bush administration requested in its fiscal 2005 budget for the IRS, 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 agency's systems modernization projects on track and fund efforts to enforce tax payments.

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

In the separate budget it submitted to Congress, the oversight board requested $2.1 billion for information technology, including $1.7 billion for information systems, an 8 percent increase, and $400 million for business systems modernization, a 3.1 percent increase.

Nancy Killefer, the board's chairwoman, told lawmakers it would be shortsighted not to spend the money necessary to help the IRS eliminate what is now estimated to be a $311 billion tax gap. That is the amount of taxes officials believe Americans owe the IRS, Killefer said in her testimony before the House Ways and Means Committee's Oversight Subcommittee.

But anything more than an estimate of the tax-compliance problem is impossible. James White, director of tax issues for the General Accounting Office, told subcommittee members that the IRS lacks the tools for understanding the true size of the compliance problem. The agency is developing the tools, he said, but they will not be available until next year.

"Right now, they're sort of flying blind when it comes to knowing how much to allocate to enforcement," he said.

In addition to hiring more enforcement officers, achieving greater payment compliance from taxpayers is closely linked to modernizing IRS tax-processing systems and expanding electronic filing, White told lawmakers. Thanks to e-filing, the IRS has eliminated about 1,000 full-time equivalent positions in its tax-processing centers, he said. In fiscal 2005, the agency expects to cut another 130 FTEs for a savings of $5.1 million.

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