“The new schedules will force some taxpayers to cross-reference and transfer data such as credits, deductions, and income, increasing the potential for errors to occur since the tax information is dispersed over many pages and needs to be tracked down and reported on different schedules and forms,” the report says.
The problems that became apparent during the 35-day shutdown, which ended Jan. 25, underscored some of the agency’s deeper flaws, including a reliance on 1960s-era technology, the audit found. The systems that contain the official record of taxpayer accounts are the oldest in the federal government.
“For the last 25 years the I.R.S. has tried — and been unable — to replace them,” the audit says, citing budgetary constraints.
The outdated systems deprive the I.R.S. of a comprehensive view of taxpayers’ accounts, hampering the agency’s ability to properly identify who should be targeted for outreach, collections and audits.
Inadequate financing is a primary cause of the agency’s failings, the audit found. Congress has long beat up on the I.R.S., routinely condemning its performance while cutting its budget. From fiscal 2017 to fiscal 2018, for example, money for improvements was reduced 62 percent, to $110 million.
Taxpayers who called the I.R.S. last fall for advice about how they would affected by the new tax law were frequently told that there was “no tax law personnel at this time due to budgetary cuts,” and disconnected, the audit found. Part of the reason was a decision by the agency to answer tax law questions only during the three and a half months from January until tax filing day.
The problem has been compounded by the I.R.S. chief counsel’s office issuing fewer guidelines, despite the widespread ambiguity and confusion created by the tax code overhaul.
A lack of information has also meant that the vast majority of taxpayers eligible to use free software to file their returns electronically do not take advantage of the program. Of the 106 million taxpayers who could qualify for the free program, fewer than 2.5 million use it.