Watchdog: Budget cuts lead to poor taxpayer service at IRS

The IRS provided poor customer service during this year’s tax filing season as taxpayers struggled with a rise in identity theft and complications related to President Barack Obama’s health care law, a government watchdog said Wednesday.

About 6.6 million taxpayers paid fines because they didn’t have health insurance, according to a new report by the National Taxpayer Advocate. The fines averaged $190.

The report said many of the problems are pegged to an IRS hampered by budget cuts.

The report says the IRS blocked nearly 1.6 million suspicious tax refunds this year because of concerns about identity theft. About a third of the refunds turned out to be legitimate, but for long stretches during tax season, fewer than 10 percent of callers could get through to an IRS help line.

“For the majority of taxpayers who filed their returns and did not require IRS assistance, the filing season was generally successful,” said the report by Nina E. Olson. The taxpayer advocate is an independent office within the IRS.

“For the segment of taxpayers who required help from the IRS, the filing season was by far the worst in memory,” the report states. “To a significant degree, the IRS’s shortcomings are budget-driven.”

Overall, only 37 percent of people who called the IRS for help during tax season were able to reach a person, the report said. For those who got through, the average time on hold was 23 minutes.

IRS help lines were so overloaded that the system hung up on 8.8 million callers, the report said. That’s a huge jump from last year, when the IRS hung up on 544,000 callers.

The report by the taxpayer advocate noted that taxpayer services suffered just as Americans were faced with new requirements under the health law. For the first time, taxpayers had to say whether they had health insurance the previous year.

About 2.6 million families said they received subsidies to help pay for premiums. The subsidies come in the form of tax credits. They averaged $3,000 per tax return, for a total of about $7.7 billion.

This story was originally published July 15, 2015 at 11:22 PM.