Apr 09 2003

SHELBY COMMENTS ON FY04 APPROPRIATIONS FOR IRS

U. S. Sen. Richard C. Shelby (R-Ala.), Chairman of the Senate Transportation, Treasury and General Government Appropriations Subcommittee, commented on the Fiscal Year 2004 appropriations process for the Internal Revenue Service (IRS):

“With the April 15th tax filing deadline less than a week away, it is appropriate that we review the Internal Revenue Service (IRS) fiscal year 2004 budget request. Since the newly nominated Commissioner of the Internal Revenue Service has not been confirmed, we will hear from Bob Wenzel, the Acting Commissioner of the IRS. I would like to thank you for appearing before the subcommittee today.”

“Although I am the Chairman of the newly created Transportation, Treasury and General Government subcommittee, these are not necessarily new issues for me. Many of you may recall that I was the Chairman of the Treasury & General Government Subcommittee when the reorganization and modernization of the IRS was in its infant stage. Since those days, the IRS has improved its service to the taxpayers, but there is still a great deal more to be achieved.

“I am relieved to know that today, unlike the last time I chaired a hearing on these issues, taxpayers are receiving courteous service, refunds are being processed in a timely manner, and more individuals are filing their taxes electronically. The Offer in Compromise program is working efficiently to help taxpayers eliminate tax debts and the Innocent Spouse program, I am told, is also making progress because only the guilty party is now being assessed the tax liability.

“Even with the success of all of these programs, the IRS still has a long way to go to provide the services that taxpayers deserve and expect.

“I believe that the IRS should provide top quality service to America's Taxpayers by helping them understand and meet their tax obligations and by applying the tax laws with integrity and fairness. Americans deserve and expect no less from the Service.

“Turning now to the IRS budget request, I would like to point out that your fiscal year 2004 request is $10.4 billion -- an amount that comprises over 90 percent of the overall budget for the Department of the Treasury.

“The Services' ongoing Business Systems Modernization efforts will require $429 million in fiscal year 2004. The subcommittee appreciates the efforts that continue to go into this massive upgrade that, we hope, will improve the speed, timeliness and accuracy of IRS' administration of the tax system.

“I am aware that last year's efforts encountered some setbacks and I am interested to learn how the Service has gotten back on track and will ensure that such issues will not occur again because I expect positive results from such an investment.

“While the IRS' traditional role is to implement and enforce our tax laws, it has also been charged with administering the Earned Income Tax Credit. The Earned Income Tax Credit Program (EITC) has expanded since its enactment in 1975 and at the same time has become more politically controversial.

“This budget proposes a number of changes to that program because of the high level of fraud associated with the program's administration. Each year the IRS makes approximately $9 billion in erroneous earned income tax credit payments. This is a direct and permanent cost to the American taxpayer because it is virtually impossible to recapture these payments once they have been made.

“You are requesting $251.2 million in FY '04 for the EITC program, and of that amount $100 million is requested to implement the Earned Income Tax Credit task force recommendations to address the problems associated with current program administration that results in these overpayments. Eliminating erroneous payments and ensuring the proper administration of this program are certainly goals with which I completely agree.

“Compliance is also a problem and you are requesting an additional $133 million for additional staff to strengthen compliance. I am interested in hearing of the abusive tax schemes you will be targeting and how you will deal with them.

“With the IRS' progression into the information age, I am keenly interested in how the electronic filing system is working, who is using the system, under what conditions and finally, what kinds of systemic costs savings are being realized.

“The IRS promotes electronic filing as "free", but I have been made aware that most, if not all of the programs or services that are required to do so charge a fee. I don't know anyone that would agree that's free. I am interested in exploring this more.

“Along those lines, the IRS has initiated a new program called Free File which is a public-private partnership between the IRS and a consortium of tax software companies that offer free filing services to qualifying taxpayers. I applaud this effort and the assistance that it provides low-income taxpayers.

“It is my understanding that savings identified because of electronic filing and increases in productivity will enable the IRS to close one of its processing sites. I would think that the closure of this processing site will realize some savings. Additionally, I am interested in how you think continued increases in electronic filing will change the nature of the IRS and its workforce.

“Another significant change in this budget proposes to employ private collection agencies to track down taxpayers that owe billions of dollars in delinquent taxes. I do support the effort of collecting delinquent debt but this is of serious concern to me because in addition to having a responsibility to protect taxpayers' privacy, I cannot imagine IRS having the resources to administer and oversee such an undertaking.

“While this is a fairly straightforward budget, the IRS proposes a significant number of changes in the way that it does business. As I mentioned, I am very interested in these changes and look forward to your explanation of the proposals included in this budget.”