TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Friday, January 19, 2018

The Effect Of A Government Shutdown On The IRS: Not What You Think

Machines are cheap. Humans are expensive. The IRS depends upon both to administer the fiendishly complex tax code that Congress tirelessly re-scrambles every year. This year is, of course, much, much worse. And everyone seems at least aware that a government shutdown will hurt the IRS’s ability to implement the new law. Here’s a recent WaPo article on the subject.

But the effect of a government shutdown on IRS operations is worse than is being reported.  More below the fold.

As I explained in last Monday’s Lesson From The Tax Court, the chronic shortage of funds has most obviously affected the human side. The loss of human personnel has been devastating. The IRS Oversight Board put it well in its FY2015 Report: “This means a current IRS employee will see five coworkers leave, some of them the most experienced and well trained, before one new employee is eventually hired to cope with a growing workload.”

Ironically, since the Oversight Board wrote that report, it is no longer functional because of the current administration’s ineptitude at filling appointments. Here’s what you find when you go to the Board’s home page:

The IRS Oversight Board does not currently have enough members confirmed by the U.S. Senate to make up a quorum and as a result has suspended operations. The Board will reconvene once it has a quorum.

One might think that if the IRS does not have the employees, it cannot do the work of processing returns, assessing taxes and collecting unpaid taxes. One would be wrong. The work will indeed continue, only with more unchecked errors. Loss of personnel does not mean stoppage of work; it means increased errors by the IRS because of unchecked automated processing of taxpayer accounts.

As I have elsewhere described in long, boring academic detail, the IRS has resolutely automated various tax administration functions for most of the 20th century to the point now that it is reasonable to say tax administration is run by machines, not humans.

Shifting work to computers is scary for many people, and rightly so. In fact, when the IRS first started using computers to process returns in the early 1960s, it created a public relations film to calm fears. The PSA is called “Right on the Button.”

I have also previously explained that what truly abuses taxpayers is unsupervised machine processing, because that’s often where errors creep in and it takes human employees to manually sort through the discrepancies. The short of it is that most adverse actions taken against taxpayers result from automated processing of taxpayer accounts: computers shoot first, and it is up to the taxpayer to ask questions later. When the computers get it wrong, adversely affected taxpayers must find a real, actual, live human to fix the problem. But who ya gonna call when there is no one there? When the already staggeringly understaffed IRS offices are completely emptied because of a government shutdown, there is no-one to stop the machines. And yet the computers keep on keeping on.

We saw this back in 2013, when the government shut down from October 1 to October 16. There were very, very few IRS employees working. Yet the machines kept whirring away. The National Taxpayer Advocate reported that during the shutdown – even with only a few employees – computers took a total of 301,807 adverse actions against taxpayers, including grabbing bank accounts, wages, Social Security benefits, filing Notices of Tax Liens, setting up deficiency assessments and more.

All of those actions were computer-generated. No human gave input or oversight. Let’s assume the computers got it 99% right. That still means more than 3,000 of the actions were in error, errors that could have devastating effects on taxpayers. Yet there were no humans to fix the mistakes.

The 2013 shutdown was 15 days.  If this happens again, how long will this one be?

This is not a rational way to run the county. But I suppose it is futile to expect collective rationality from the men and women whose bickering voices fill the halls of the current Congress. They have enough problems dealing with the personification of Mayhem in the White House.  Hey Allstate!  Ya got a policy for that?

http://taxprof.typepad.com/taxprof_blog/2018/01/effect-of-shutdown-on-irs-not-what-you-think.html

Bryan Camp, IRS News, Miscellaneous, News, Tax, Tax Policy in the Trump Administration | Permalink

Comments

The problem is not the reduced presence of tax collectors, or that those who still work don't have money for new rubber hoses to beat taxpayers with.

No, the problem is that the uppermost layers of that vampiric hive mind have decided to let programmers decide when to file for liens, when to garnish a taxpayer's wages, when generally to cause ruin in people's lives.

Just as the state is required to seek the concurrence of a jury of an accused's peers before depriving someone of life or liberty, such measures must always be done under adult supervision at the very least. No employees? No enforcement. Congress will see the light soon enough once the pork barrel runs empty, and they can spend the wasted time by explaining what the admission of avowed lawbreakers -- illegal immigrants -- has to do with budgeting.

As for the tax code, its inscrutability is a feature, not a bug: If it were simple, half of congress members' fellow lawyers would be out of work, and the Apples, Microsofts and ExxonMobils of the world wouldn't have tax loopholes. Charge a fair rate, disallow exceptions, done.

Posted by: Felix Kasza | Jan 21, 2018 10:47:59 AM

If having fewer people and more computers means the IRS is less able to be used for political purposes by a future, Obama-like administration, then I am all for it.

Posted by: Michael W. Perry | Jan 21, 2018 11:26:42 AM

What will be different this time is that AM phones will be up, ACS will be staffed, and Submission Processing will be staffed. If this stretches to February 20th then the first Processing Year 2018 refunds will be delayed. All refunds are halted for now. Things will be slightly different as the Balance Due gates should be staffed pretty heavily starting Monday.

I should know. I’ll be sitting there taking calls in AM. As long as nobody expects miracles & we don’t have IT failures we might make it through. TAS is out and W&I/SBSE will be fragile at best.

Posted by: Stephen Kellat | Jan 21, 2018 8:00:01 PM

It is an easy problem to solve. Follow this three step process.

1) Don't be corrupt
2) Don't get your budget cut
3) Don't get fired or sent to jail

Posted by: wodun | Jan 22, 2018 12:40:45 AM

@Stephen, thanks for that helpful update and those details. Good luck with the calls!

Posted by: Bryan Camp | Jan 22, 2018 5:44:06 AM

The shutdown is over, so the IRS can get back to engaging in viewpoint discrimination, confusing people with ACA requirements, and generally wasting taxpayer dollars...

Posted by: MM | Jan 22, 2018 6:39:29 PM