29 September 2016

IRS Collected More Tax Revenue with Fewer Employees and Lower Budget

Washington, D.C. (September 28, 2016)  
By  Michael Cohn

Despite years of cuts to the Internal Revenue Service budget and its employee count, the agency is nonetheless collecting more tax revenue, according to a new report.

The report on IRS compliance activities, from the Treasury Inspector General for Tax Administration, noted that in fiscal year 2015, the IRS continued to lose employees who could provide taxpayer service and enforce the tax laws. Although there was a slight increase in the IRS’s fiscal 2014 budget, the budget for fiscal 2015 declined 3 percent to $345 million, from $11.3 billion to $10.9 billion.

However, despite fewer resources, the total amount of tax revenues received and collected by the IRS continued to climb to $3.3 trillion, an increase of 8 percent from FY 2014. The improving economy probably accounted for much of that increase.

On the other hand, enforcement revenue collected by the IRS decreased from $57.1 billion in FY 2014 to $54.2 billion in FY 2015, a decline of 5 percent. Unpaid assessments increased to $412 billion.

The IRS’s collection function activities showed mixed results in FY 2015. While some areas of compliance declined, collections on delinquent accounts increased in every collection program except the IRS’s field collection unit. The collection function continued to receive more delinquent accounts than it closed, even though the number of accounts closed as uncollectible has actually decreased in recent years. 

The IRS also did fewer enforcement actions during FY 2015. The number of levies, seizures, and Notices of Federal Tax Lien all declined this past year. In addition, the use of payment options such as offers in compromise and installment agreements fell, although the amount of delinquent taxes collected through these tools increased.

Meanwhile, the IRS’s examination function conducted fewer examinations in FY 2015, with the field examination group performing 28 percent fewer examinations than in FY 2011. The report pointed out that the declines in the number of examinations are directly related to the 24 percent decline in the revenue agents and tax compliance officers available to perform them during that period. However, during FY 2015, the dollar yield per hour for most types of tax returns actually increased. At the same time, the no-change rates for revenue agent examinations of corporations increased, but it decreased for examinations of individuals.