While GOP appropriators in Congress have been eager to slash spending at the IRS in recent years, Treasury Secretary Steven Mnuchin has said he's concerned about the lack of staff and resources at the tax-collecting agency.
The pickup in spending in the first quarter largely reflected increased outlays for the departments of defense and homeland security, partly due to hurricane relief, and on Social Security, the Congressional Budget Office said in a report this week. Some experts worry that mistakes by the IRS or employers could lead some taxpayers to underpay in 2018 and end up with too little taken out of their checks in 2018 to cover their total tax bill.
As one example of the challenges the agency faces, and the questions the IRS can expect from taxpayers, the new law reduces the maximum home mortgage eligible for the mortgage interest deduction from $1,000,000 to $750,000 for indebtedness incurred after December 15, 2017.
The New York Times on Wednesday reported that Nina Olson, head of the Taxpayer Advocate Service, told Congress in her annual report that the IRS spent $20 million on private debt collection during the last fiscal year, collecting only $6.7 million in back taxes after spending more than triple what was brought in.
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The near-doubling of the standard deduction, along with the increase in the phase-out and the refundability of the child tax credit will go a long way in making up for the loss of personal exemptions for most taxpayers. The new law is complicated. And that results in a refund when they file their tax returns. If previous tax-code changes are any guide, the number of queries is likely to rise significantly, pushing down the response figure even more. But for larger families it could push up their taxable income and their total tax bill.
"The IRS will have its hands full in implementing the new law", Olson said.
"As the National Taxpayer Advocate, I see daily the consequences of reduced funding of the IRS and the choices made by the agency in the face of these funding constraints", Olson wrote in the preface to the report.
The new system ushered in by the tax reform law will be ready for 2019, but the immediate guidelines are created to allow wage earners to get immediate benefits this year without snags.
Although not flawless, the Tax Cuts and Jobs Act will have significant, positive effects on the economy. The IRS will work with the business and payroll community to encourage workers to file new Forms W-4 next year and share information on changes in the new tax law that impact withholding. Honest Utahns and other Americans will pay the price in terms of poorer customer service and further cuts to federal programs, while those out to take advantage of the confusion through hacking and tax fraud will benefit from the gutting of an essential part of the American government.