For those who weren't disconnected, only 40 per cent actually got through to a person. And many of those people had to wait on hold for more than 30 minutes, IRS Commissioner John Koskinen said Wednesday.
The number of disconnected callers spiked just as taxpayers were being hit with new requirements under the health law. Last year, the phone system dropped 360,000 calls, Koskinen said.
For the first time, taxpayers had to report whether they had health insurance last year on their tax returns. Those who received government subsidies had to respond whether they received the correct amount. People without insurance faced fines, collected by the IRS, if they did not qualify for an exemption.
A new staff report by Republicans on the House Ways and Means Committee criticized the agency's spending priorities. The report said the IRS diverted $134 million in user fees that had been spent on customer service last year to other areas this year.
"It looks to me like you're purposely harming taxpayers," Rep. Kristi Noem of South Dakota told Koskinen at a hearing Wednesday.
Koskinen said the user fees were spent on computer upgrades to implement the health law as well as a new law requiring foreign banks to report information about U.S. account holders.
He said budget cuts approved by Congress left him no choice. The agency's budget has been cut by $1.2 billion since 2010. It now stands at $10.9 billion.
"Customer service, both on the phone and in person has been far worse than anyone would want," Koskinen told the Ways and Means oversight subcommittee. "It's simply a matter of not having enough people to answer the phones and provide service at our walk-in sites as a result of cuts to our budget."
Republicans in Congress adamantly oppose Obama's health law, so some have been working to starve the IRS of funds just as its role in implementing the law ramps up.
It won't work, Koskinen said. The IRS is required by law to help implement the health program and the foreign reporting law, leaving the agency with few other places to cut. He said the agency requested a total of $600 million over the past two years for computer upgrades to deal with the new laws.
"In both years the Congress gave us zero dollars so we had no choice but to look elsewhere," Koskinen said. "We funded the statute that we are required to implement."
The IRS has spent more than $1.2 billion implementing the health law. This year, the agency is scheduled to spend an additional $533 million, said the Ways and Means report.
Each year, millions of Americans call the IRS with questions about filling out their tax returns. Last year, 39.9 million people called.
When too many people call at once, the IRS system hangs up on callers at the beginning of their calls, rather than have them wait on hold for an hour or more. The agency refers to these hang-ups as "courtesy disconnects," according to the Ways and Means report.
Koskinen warned at the beginning of the year that phone service would suffer this year because of budget cuts. He said the agency, which has around 90,000 employees, is down 13,000 workers since 2010.
Republicans in Congress have also been at odds with the IRS since 2013, when agency officials acknowledged that agents had inappropriately singled out conservative political groups for extra scrutiny when they applied for tax exempt status.
The controversy has sparked investigations by the Justice Department and several committees in Congress.
"As a result of the IRS' blatant misconduct, Congress significantly reduced the agency's budget," said the report by Ways and Means Republicans.
But Rep Peter Roskam, R-Ill., said Congress did not cut funding for taxpayer services. He said that decision was made by the agency.
"The amount of money Congress appropriated to the IRS for taxpayer assistance was the same this year as last year, but the level of service has decreased drastically," said Roskam, who chairs the oversight subcommittee. "So what happened? The IRS made the decision to move money away from taxpayer assistance."
Roskam and other Republicans complained that the IRS spent $60 million on employee bonuses last year while it was cutting customer service. The IRS also allows employees to spend nearly 500,000 hours a year working on union activities while being paid by the agency, he said.
Koskinen defended paying performance bonuses, saying they improve productivity. He said federal law requires the IRS to allow workers to engage in union activities while getting paid.
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