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Penny-wise, pound-foolish: Congress and tax compliance

The budget woes of the IRS have been an ongoing thread in this blog for several years. How could it be otherwise, when Congress has so consistently refused to fully fund the agency responsible for collecting the nation's taxes?

In this post, we will update you on how budget cuts at the IRS continue to impact tax compliance.

Since 2010, the IRS is down by 15,000 employees overall. Fully one third of those employees have been in frontline compliance roles, such as revenue officers and staff members for the Criminal Investigation division.

With fewer employees, the IRS has not been able to audit as many returns as it used to. From 2010 to 2015, the total number of tax audits of individuals went down from by 22 percent. This means there were about 300,000 fewer audits done last year than there were five years ago.

Not surprisingly, conducting fewer audits has resulted in collecting less tax revenue from audits. In fact, it has resulted in a lot less audit revenue, numbering in the billions over the course of a year.

IRS Commissioner John Koskinen has repeatedly told Congress that its cuts to the IRS budget are penny-wise but pound-foolish. By cutting the IRS budget by millions of dollars, Congress has cost the government billions of dollars in uncollected taxes.

Koskinen asserts that for every dollar invested in the IRS, Uncle Sam gets a return of $4 in tax revenue. No one in Congress has quibbled with this calculation. But the budget cuts have continued to occur.

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