July 1, 2013

The Impact of Fewer IRS Audits for 2013

The Impact of Fewer IRS Audits for 2013 Tax & Business

The government’s spending cuts or sequestration, which went into effect on March 1, 2013, has been taking a toll on the nation across the board. Many vital agencies are experiencing the financial difficulties associated with the government’s budget cuts, which are reducing the agency’s ability to function to the fullest potential. In particular, the sequester has forced the Internal Revenue Service (“IRS” or “the agency”) into budget cuts of $600 million which has had a social and economic effect on the government, the IRS, and the taxpayer as fewer audits are being conducted.

The agency is responsible for tax collection. With fewer planned audits, Mark W. Everson, former head of the IRS, states the government is limiting the revenue that flows into its coffers. Revenue is an important component of the government operations. It is ironic that by trying to reduce spending, the government is in fact inhibiting itself from revenue inflow. Consequently, the reduction in collections is hurting the economy and the future aspirations of the government.

The sequester has a direct social and economic effect at the agency. The agency’s employees have started to experience furloughs that began on May 24, 2013. If the government does not take the initiative to reduce or eliminate the spending cuts, it is reported that the IRS will have to start unpaid employee furloughs and will only be able to save by continuing the hiring freeze, reducing funding for grants and other expenditures, and cutting costs for travel, training, facilities, and supplies. The spending cuts are limiting the agency from performing to its highest potential. The limitation faced by the agency is preventing it from growing and providing more services for the government, economy, and American people.

For the American taxpayer, the forced budget cuts mean fewer tax audits. With the agency working with limited resources, it simply does not have the manpower to complete as many audits as in previous years. However, the agency claims that the spending cuts will not delay processing of individual income tax refunds but, on the other hand, the cuts will hamper the level of service provided. The agency warns taxpayers that it will be harder to get the IRS on the phone, and will take longer to get responses to taxpayer letters with fewer employees working. The decline in customer service and longer hold time will frustrate taxpayers who might have urgent matters and questions to resolve.

The sequester is having an impact on different stakeholders such as the government, IRS, and the taxpayer. The impact will be felt for many years into the future through reduced revenue, employee furloughs, fewer audits, and greater service delays.

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