IRS Warns of Refund Delays Due to Budget Cuts

After absorbing a $346 million budget cut, IRS officials are warning taxpayers not to expect their phone calls to get answered or their refunds to be delivered as quickly as in the past. Employees shouldn't count on overtime pay, or for empty staff slots to be filled. And lawmakers seeking to reduce the deficit should assume the agency will collect far less revenue than it could have. The warning includes something that will affect many taxpayers – tax refunds from the 2015 tax filing season may be delayed.

IRS Commissioner John Koskinen is saying everything from taxpayer services to enforcement efforts could be affected.

He assured the public that "Everybody's return will get processed. But people have gotten very used to being able to file their return and quickly getting a refund. This year we may not have the resources, the people to provide refunds as quickly as we have in the past."

In recent years, the IRS says it was able to issue most tax refunds within 21 days, if the returns were filed electronically. Koskinen wouldn't estimate how long they might be delayed in the upcoming filing season, which begins in just a few weeks.

The cuts come at the same time that the IRS is starting its significant role in implementing President Obama's health care law. For the first time, taxpayers will have to report on their tax returns whether they have health insurance. Koskinen said the IRS is required to enforce the law, so other areas will have to be cut, including taxpayer services and enforcement.

Budget cuts will mean less people to do more work. "In some ways, these budget cuts are really a tax cut for tax cheats," Koskinen said. "Because to the extent we have fewer people to audit and enforce the tax code, that means some people cutting corners on their taxes or not complying are going to get away with it, and that is a decision that Congress has made."

In all, the IRS is operating with roughly $1.2 billion less than it did in 2010, when the agency's budget reached its high-water mark of roughly $12.1 billion.

The $10.9 billion the agency is slated to receive for 2015 is a 3% cut from last year and the IRS smallest budget since 2007. Adjusted for inflation, the IRS budget is roughly equivalent to what Congress gave it in 1998 — an era when the agency processed about 30 million fewer returns in a given year.