IRS needs more money to implement the new tax law

Your tax reform questions answered
Your tax reform questions answered

A new tax law means millions of people will have questions about their taxes. Problem is, there won't be enough people at the IRS to answer them ... unless lawmakers boost the agency's funding.

Even before the federal tax overhaul was passed in December, the IRS was already projecting that its representatives would only be able to handle 4 out of every 10 taxpayer calls in fiscal year 2018.

That's according to National Taxpayer Advocate Nina Olson in her annual report to Congress, released Wednesday.

The dismal call-response rate -- and other challenges the IRS faces in trying to clear up confusion and administer the new tax law -- is due in part to funding cuts that have essentially shrunk the IRS budget by 20% since 2010.

"The IRS will have its hands full in implementing the new law," Olson said in her report.

She notes that there has already been considerable public confusion about withholding changes, the deductibility of prepaid property taxes, and whether states may let taxpayers make charitable contributions in lieu of taxes to claim larger deductions than otherwise would be allowed now that there is a new $10,000 cap on the state and local tax deduction.

Olson couldn't be more stark in her recommendation to lawmakers: "The IRS absolutely needs more funding. It cannot answer the phone calls it currently receives, much less the phone calls it can expect to receive in light of tax reform, without adequate funding."

The agency itself estimates it will need an additional $495 million in fiscal years 2018 and 2019 to update its systems, answer more taxpayer calls, draft new documents and other tasks related to implementation, Olson said.

It's not clear, however, how willing the Republican-controlled Congress will be to augment the agency's budget.

In addition to more funding, Olson also allows that within the agency's current budget, the IRS can do a better job managing it.

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

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