Panel blasts IRS budget cuts

The across-the-board budget cuts proposed in the fiscal 2003 budget plan could eliminate many of the electronic gains that the Internal Revenue Service has made in the past three years for customer service, according to the IRS Oversight Board.

In addition, the budget proposal now making its way through Congress would hurt the IRS' efforts to modernize its business systems, cutting $70 million out of a modernization program that is intended to turn the paper-based agency into a paperless one.

The IRS Oversight Board issued its dire prognosis Jan. 30, two days after a meeting in which they heard a presentation by Todd Grams, the IRS' chief financial officer. Grams reported that the proposed 2.9 percent cut in IRS funding could translate to a significant drop in customer service.

"The American public needs and deserves customer service and fairness when dealing with the tax system," said Nancy Killefer, chairwoman of the oversight board. "This across-the-board cut for the IRS is counter to those needs."

Killefer said that the oversight panel did not want to see a "downward spiral on customer service and compliance activities" after the IRS has made great progress in the past three years.

"We believe the final version of the [fiscal 2003] appropriations bill should not include the Senate's proposed across-the-board cut," Killefer said.

Congress is still working on the fiscal 2003 budget, and negotiators are expected to resolve differences between House and Senate versions of the spending bill in the coming weeks.

But if the IRS budget is cut, Grams said in his presentation, 2.6 million taxpayer phone calls will go unanswered and 11 extra days will be needed to process taxpayer refunds. Nearly 2 million pieces of correspondence will not be answered in a timely matter, and 75,000 audits will not be completed.

In addition, the agency's business systems modernization budget would be reduced to $380 million, a $70 million cut from the proposed budget request, which would hurt specific management functions at the expense of taxpayer needs.