The IRS is not yet prepared to handle all the phone calls it expects when health reform hits millions of Americans’ tax returns next year, the agency’s top executive said Thursday in Kansas City.
“People won’t be able to get through on the phone. We know people are going to call. Preparers are going to call,” said John Koskinen, the recently confirmed commissioner of the Internal Revenue Service. He was visiting the IRS’ huge Kansas City processing campus on a tour of 25 large agency sites nationwide.
The IRS will be responsible for collecting a tax penalty from those who don’t get health insurance coverage as required under Obamacare. That penalty — at first generally $95 for each adult or 1 percent of income if that is higher — will show up as a higher 2014 tax bill, or a lower refund.
Next tax season, the agency also will have to make sure taxpayers who are getting federal assistance now had received the right amount of tax credits. The credits make coverage more affordable, and they depend on the amount of income a taxpayer makes.
Koskinen expects a deluge of calls next tax season when the Affordable Care Act first shows up on Americans’ tax returns. But, he said, the IRS lacks enough employees to handle the phone calls it is getting this tax season without Obamacare.
“If our resources continue to be constrained, we’re going to face the same problem” next year, he said.
Koskinen said the Affordable Care Act triggered 47 system changes the IRS needs to complete for next tax season — and he’s “comfortable and confident” those will get done.
“We’ll meet the technological challenge. We’ll do the very complicated, difficult things very well,” he said. “But the resources for responding to inquiries are still going to be constrained unless that situation changes.”
Cost-cutting at the IRS has reduced its workforce by 10,000 in the last four years, Koskinen said. It employs about 90,000 and operates on an $11 billion budget.
Still, resources are so tight that Koskinen apologized in advance for callers who won’t be able to reach the agency by phone this tax season. Last year, 18 million phone calls to the tax agency “didn’t get answered at all,” he said.
Use the IRS’ website, or visit any of its taxpayer assistance sites, he said. Most everything can be handled that way.
No website will be able to handle all the Obamacare questions expected next tax season, said Kathy Pickering, executive director of the Tax Institute at H&R Block in Kansas City.
Pickering said consumers already are confused and filled with questions about health care reform. Many simply will need direct attention.
“He makes a really good point,” Pickering said of Koskinen’s concern about phone traffic from taxpayers next year. “They need to talk to a live person, whether it’s in person or on the phone.”
The White House had added $330 million to the IRS budget this year to get ready for health reform next year. But, Koskinen said, Congress killed it.
The job of dealing with the tax impact of Obamacare falls to Koskinen, who has a reputation as Mr. Fix-It.
His business career included work on corporate turnarounds through the Palmieri Co., and Koskinen has served two other presidents as a troubleshooter.
Bill Clinton tapped Koskinen from a deputy post in the Office of Management and Budget to head the government’s handling of Y2K, the concern that computers and information systems were unprepared for the millennial switch from 1999 to 2000.
George W. Bush named Koskinen chairman of the mortgage giant Freddie Mac after its federal takeover in 2008 amid the financial crisis.
The tour that brought Koskinen to Kansas City comes partly to mend the tax agency’s damaged credibility.
Inquiries have focused on the IRS’ handling of applications for tax-exempt status from various groups including those with “tea party” in their names as well as the agency’s spending on conference outings and other issues.
“My highest priority initially is to actually restore whatever trust has been lost by the IRS in the last 10 to 12 months,” Koskinen said.
IRS employees Koskinen meets on the tour are giving him insight into the agency’s strengths and weaknesses, he said.
Kansas City is home to one of the agency’s largest operations. About 3,000 normally work at the 1.14 million-square-foot processing facility just west of the Liberty Memorial.
Employment already is ballooning and will peak at about 5,800 in mid-March through mid-May, said Karen Gelling, the Kansas City campus’s site coordinator.