Speaking before a standing-room-only crowd of more than 500 tax attorneys and media, Internal Revenue Service Commissioner John Koskinen stressed the importance of moving the agency forward after the Treasury Department’s inspector general report last year cited the IRS’ “inappropriate criteria” in focusing on conservative groups for review.
“The IRS is working diligently to restore whatever public trust has been lost,” Koskinen said at the American Bar Association Section of Taxation’s meeting on May 9. “The public needs to be confident that they will be treated fairly no matter who they are, what organization they are or whom they voted for.”
Koskinen discussed the agency’s urgent need for increased funding. “When you punish the IRS, you’re really just punishing taxpayers,” he said.
The ABA Section on Taxation in February issued a letter to Congress urging adequate funding for the IRS. Koskinen said he has asked for an additional $1.35 billion for fiscal year 2015. He broke down what some of those funds mean to the IRS:
• $400 million: For taxpayer services that would allow for hiring more employees and enable the IRS to handle 12 million more service calls.
• $394 million: For IT upgrades to handle the incoming IRS requirements for the Affordable Care Act and the Foreign Account Tax Compliance Act. These costs are mandated by Congress, so if the
funding does not come through, the money will have to be taken from taxpayer services, Koskinen warned.
• $334 million: For enforcement that could mean closing 500,000 additional cases and generating $2.1 billion more in revenue.
• $65 million: To fight refund fraud, especially fraud due to identity theft, allowing the agency to close 13,000 additional cases.
Koskinen said he expected 1 million audits this year, but he insisted they will be based solely on the content of the tax return and not who filed it. “Some of those who get audited will be Democrats, some will be Republicans, some will be other beliefs,” he said.
He talked at length about providing guidance to IRS employees on any new 501(c)(4) policy, emphasizing the importance of making the regulations as clear as possible. The draft proposal on new 501(c)(4) regulations has received 150,000 comments, and Koskinen conceded those will take some time to go through. He even said that a new draft proposal, and subsequent new comments and review, might be necessary, adding that the process might not be finished by the end of this year.
Koskinen also discussed the agency’s cooperation in six separate investigations (four congressional, one Justice Department and one Inspector General). More than 725,000 documents have been provided, he said. “Soon, at least one investigation will be completed,” he added. “My hope is we can move on.”
Koskinen praised IRS employees and said he has visited the largest 25 offices since taking over as commissioner. “I want to foster an environment where information flows easily from the bottom of the agency up as well as the top down,” he said. He encouraged employees to bring problems forward, adding, “We don’t shoot messengers, we thank them.”
An audience member asked about IRS employees who have been fired or forced out because of the scandal, including Lois Lerner, the former director of the Exempt Organization Division in Cincinnati who was at the center of the controversy. Koskinen said he had to “play the hand he was dealt,” adding: “Going forward, if there’s an issue, I’ll be there with them.”
Other topics that Koskinen touched on:
• The added efforts on irs.gov to add to taxpayer service: He said the “Where’s my Refund” feature, which tracks an individual’s refund, was used 200 million times last year and has been used 160 million times so far this year. He also pointed out other popular taxpayer resources, including “Direct Pay,” for easier tax payments, and “Get Transcript,” where taxpayers can download their personal tax records.
• The smooth tax season: Koskinen praised IRS workers for their completion of 135 million returns by May 2, 86 percent of them processed electronically.
• The major workload increases at the IRS: The agency is taking on additional responsibilities, such as enforcing measures in the Affordable Care Act and the Foreign Account Tax Compliance Act, which is aimed at curtailing offshore tax evasion.
