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Watchdog calls for more IRS funding as agency implements tax law

Watchdog calls for more IRS funding as agency implements tax law
© Greg Nash

The IRS needs more funding as it implements the Republicans' new tax law, but can also take some steps to improve taxpayer service that don't require any additional money, the agency's in-house watchdog said.

"The IRS will have a lot of issues to work through, and taxpayers will have a lot of questions," National Taxpayer Advocate Nina Olson said in a news release Wednesday. "But with more funding, strong leadership, and a closer working relationship with Congress, I am convinced the IRS can do the job well.”

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Olson submitted her annual report to Congress on Wednesday, which highlights the most serious problems facing taxpayers. She also made legislative recommendations for how to strengthen taxpayer rights and improve tax administration, which come as key House Republicans say they want to tackle IRS reform this year.

The IRS saw its budget cut in the early part of the decade, and Republicans have criticized the agency in the wake of 2013 revelations that it subjected conservative groups' applications for tax-exempt status to extra scrutiny.

In a preliminary estimate, the IRS predicted that it would need an additional $495 million in fiscal 2018 and 2019 to implement the tax law. The agency found 131 filing-season systems that will be affected by the new law.

Olson said in her report that there's "no doubt" that the IRS needs a funding boost.

"Funding cuts have rendered the IRS unable to provide acceptable levels of taxpayer service, unable to upgrade its technology to improve its efficiency and effectiveness, and unable to maintain compliance programs that both promote compliance and protect taxpayer rights," she wrote.

At the same time, Olson also said that the IRS can also make changes to help taxpayers within its current budget.

"Within the budget it currently has, there are plenty of opportunities for the IRS to demonstrate that it can do a better job of using creativity and innovation to provide taxpayer service, encourage compliance, and address noncompliance," she said in her report.