Former Chief: IRS nearing ‘Catastrophic’ collapse

September 8, 2022

Former IRS Commissioner John Koskinen told the Tax Policy Center (TPC) on September 8th that the agency he used to run was inching toward a “catastrophic” collapse.

“We’re getting closer, obviously,” Koskinen told TPC’s The Prescription host Howard Gleckman, who asked if operational issues have pushed the IRS toward a “catastrophic” collapse.

Koskinen cited the filing backlog, the agency’s inability to answer phones, and a declining audit rate as evidence that the agency is suffering from an inefficiency that could render it useless.

“Most people would look at that and say that’s a very sick person,” he said.

The IRS has been struggling to get a handle on its responsibilities for quite some time. The National Taxpayer Advocate, Erin Collins, in January issued a report stating that IRS problems in 2021 were extremely challenging for taxpayers and preparers alike.

“The year 2021 provided no shortage of taxpayer problems,” Collins said in prepared remarks, adding that “there is no way to sugarcoat the year 2021 in tax administration: From the perspective of tens of millions of taxpayers, tax administration did not work for them.”

Since Collins made those comments, the IRS has been given $80 billion, in part, to improve its taxpayer service. The money will be doled-out over a ten-year period.

Koskinen said that the IRS should devote a big chunk of that money to improve service by hiring more workers to answer the phones.

“It’s not rocket science, you have to hire more people to answer the phones,” he said, adding that once the IRS is back on its feet, taxpayers “should be able to reach someone on the phone [at the IRS] in 3 minutes or less.”

Currently, the agency is answering 11% of its phone calls, according to Koskinen.

The former commissioner also said that the newfound money should be used to improve the tax agency’s technology so taxpayers would be able respond to IRS letters by computer – instead of the phone.

“When the IRS sends you a message by mail, you ought to be able to respond to that online,” he said, adding that banks have such technology and the IRS should follow suit.

He also said that the agency should hire more enforcement officers, and that people complying with the tax law should not be worried about this increase.

“Basically, the average taxpayer who is compliant has nothing to fear,” he said.

Third-party reporting would also increase compliance rates.

“It’s been clear that the absence of third-party information and reporting leads to non-compliance,” he said, adding that compliance rates with third-party reporting is “over 90 percent” while compliance rates in the absence of such reporting is roughly “50 percent.”

Koskinen headed the IRS from December 23, 2013, to November 12, 2017. He was replaced by David Kautter, who was an interim commissioner. Charles Rettig became his permanent replacement on October 1, 2018. He will retire from this position on November 12, 2022.

When asked what sort of person should replace Rettig, Koskinen picked a budget guru over a tax professional.

“The last thing in the world the IRS needs is more tax expertise,” Koskinen said. “What the IRS needs in the next commissioner is someone who can take advantage of this [$80 billion] funding” Congress recently bestowed to the IRS.

President Joe Biden has yet to announce who will be Rettig’s replacement.

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