Congress members are struggling against time to dodge a government shutdown before the end of the year and into the holiday season. However, avoiding such a shutdown might be detrimental to the Internal Revenue Service (IRS) as it continues facing significant budget cuts, even if the government remains operational. So let’s have a look at why it might be and what that means for you.
How could a continuing resolution lead to IRS funding cuts?
When Congress cannot agree on which new budget to pass, they would come up with a continuing resolution, or CR, to keep the government afloat at current funding levels in the short term. However, CRs can contain provisions that impact specific agencies’ budgets. This particular CR would have a $20 billion cut to the IRS’s budget to align with the agreed-upon reductions in overall spending levels.
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What are the reasons behind proposed IRS budget reductions?
Some reasons for the urge for cuts in the IRS budget are as follows:
- Political priorities: For some legislators, reduced government spending and clamping down on the IRS became critical areas for slash.
- Previous deals: Previously struck deals such as the debt ceiling agreement committed to lowering appropriations for the IRS.
- Look at IRS Underreach: No less than some who feel the IRS capable of enforcement would support reduced budgets.
How might reduced funding affect IRS operations and taxpayer services?
There are various implications that cuts to the IRS budget can have:
- Reduced enforcement: The agency may not be able to effectively pursue tax evasion due to lack of funds and thus lose revenue.
- Reduced customer service: There will also be increased wait times for taxpayer assistance and delays in processing returns due to a budget cut.
- Postponed modernization: Plans that were to be undertaken to replace outdated technology, such as those already in place and improve efficiency, will mostly be postponed, and thus quality service will not be enhanced.
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Could IRS funding cuts impact tax refund timelines?
Less funding shrinks the scope of processing tax returns and delays refunds. Previously, budget cuts restricted the IRS from initiating tax filing seasons, which subsequently affected the receipt of refunds by taxpayers.
What are the potential long-term effects of decreased IRS funding on tax compliance?
Prolonged reductions in budget allocation by the IRS can do away with its capacity to enforce tax laws, probably leading to:
- Crippled Tax Audit– The IRS may have a large cut in budget and resources, which may lead to difficult auditing and collections activities in dealing with nonadhering taxpayers.
- Deficit in Tax Revenue: It can increase the difference between taxes owed and taxes paid, resulting in a hollowed-out government.
- Erosion in Public Trust– Taxpayers may deem non-compliance acceptable with the perception of leniency in enforcement.
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How can taxpayers prepare for potential IRS service disruptions?
To navigate possible challenges arising from IRS funding cuts, consider the following steps:
- File early: Submitting your tax return as soon as possible can help expedite processing and refunds.
- Utilize online resources: The IRS website offers a wealth of information and tools that can assist you without the need for direct contact.
- Consult tax professionals: Seeking advice from certified tax preparers can help ensure accuracy and compliance, especially if IRS assistance is limited.
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