The IRS could face “catastrophic” technology breakdowns that would delay refunds for 100 million taxpayers if Congress approves additional cuts in the agency’s budget, the departing commissioner, John Koskinen, warned Monday.

The Internal Revenue Service also could face a decline in voluntary tax compliance. And it could confront difficulty adjusting its electronic systems to handle tax reforms being discussed by Congress and the Trump administration, he said.

Koskinen, a lightning rod for Capitol Hill criticism and even an impeachment target during his four-year tenure, used his final news conference to issue don’t-say-you-were-never-warned predictions about the potential impact of deep cuts in the IRS’s budget and personnel.

Approximately 64% of the tax agency’s information technology hardware systems “are aged and out of warranty,” said Koskinen. Roughly 22% of the IRS’s software products are “two or more releases behind the industry’s standard, he said. As a result, a technology breakdown “is not a question of whether, simply a question of when,” he warned.

“If this failure were to occur during a filing season, we could be looking at a lengthy interruption in processing returns and issuing refunds,” Koskinen said. “This could have a devastating effect on more than 100 million taxpayers waiting on their refunds, as well as the nation’s economy, which sees some $275 billion in refunds each winter and spring.”

Budget cuts similarly have removed about 20,000 full-time IRS employees since 2010, including 7,300 key enforcement workers, Koskinen said. The tax agency audited fewer than 935,000 individual tax returns in the 2017 fiscal year, the lowest number in 14 years, he said.

Moreover, the number of tax cases recommended for prosecution for non-payment claims or other issues is 36% below the 2010 total, he said.

“If people think that many others are not paying their fair share or that they’re not going to get caught if they cheat … our voluntary compliance system will be put at risk,” Koskinen said. “A 1% drop in the compliance rate translates into a (federal government) revenue loss of over $30 billion every year.”

Although IRS staffers are stretched with multiple missions, they’re prepared to make any changes required by the tax reform debates on Capitol Hill, he said. However, rolling out those changes quickly could be difficult if the provisions are made retroactive to the 2018 tax filing year, he said.

Saying, “I’m blaming Congress,” Koskinen vented about the budget cuts as he prepares to make way on Nov. 13 for interim IRS director David Kautter, currently the Department of the Treasury’s assistant secretary for tax policy.

Some members of Congress have returned the sentiment as they trimmed the agency’s   budget. Capitol Hill conservatives accused Koskinen of improperly stymieing investigations of the IRS’s handling of the Tea Party and other conservative groups that had sought tax-exempt status. He denied the charges, and successfully outlasted impeachment calls.

“I’m hopeful that in the future the IRS and Congress can have a more rational and reasonable discussion about the resources the agency needs to meet its very critical responsibilities,” Koskinen said.

Source: USA Today 1/10/18