Treasury Exec Blasts Tax System

Mark Mazur is a heavyweight numbers guy and he didn't mince words about the current state of American business tax policies during a recent speech.

“The business tax system today is inefficient, overly complex, and too riddled with loopholes,” Mazur said, making it difficult for US business to function as a world-class system.

Mazur, assistant secretary for tax policy at the U.S. Department of Treasury, a position to which he was appointed in 2011 by President Barack Obama, made the comments while addressing the NYU/KPMG Tax Lecture Series, according to an article in Accounting Today.

Chances are, Mazur's patience is wearing thin from having to help his employer deal with the intense criticism aimed at the Treasury Department's red-headed stepchild - the Internal Revenue Service - over the past few years.

Worse news came today when, writing for Forbes Magazine, Robert W. Wood reported that the IRS doled out $3 billion in erroneous business tax credits to corporations that did not qualify and handed out $5.8 billion in erroneous tax refunds in 2013 alone.

The tax credits are for business taxpayers, Wood said, and covered such varied activities as providing childcare for their employees’ children. In 2013, corporations claimed more than $93 billion worth of tax credits, the report reveals. But it turns out many of those credits were wrong. Mistakes were found in over 3,000 electronically filed corporate tax returns.

Ironically, just last week, IRS Commissioner John Koskinen said that the agency is significantly under-funded, and those cuts mean there will be a decline in service for taxpayers, and pledged that service would improve if they got more money.

"Customer service -- both on the phone and in person -- has been far worse than anyone would want," Koskinen said. "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."

But a congressional panel report found recently that the IRS had cut customer services while continuing to hand out bonuses to employees, allowing staff to conduct union activities, failing to collect debt owed by employees of the federal government and spending over $1.2 billion on implementing ObamaCare, according to Fox News.

The panel reported that even though the IRS’s budget for taxpayer assistance remained flat from fiscal year 2014 to 2015, the level of over-the-phone customer service significantly decreased, with the agency shifting staff in customer service to focus on written correspondence instead of telephone calls. Meanwhile, the number of calls doubled in that period.

The panel found that wait times increased from 18.7 minutes to 34.4 minutes, and answered calls decreased from 6.6 million to 5.3 million.

“In January 2015, the IRS commissioner estimated that taxpayer service would decline while delays in tax refunds would increase. While the IRS commissioner has blamed this solely on budget cuts, in reality the IRS deliberately diverted resources away from taxpayer services,” the report found.

Despite the drop in service, there was no significant decrease in bonuses for IRS employees. Notably, in November 2014, despite another round of budget cuts at the IRS, Koskinen announced that employees would receive bonuses at the same level as for the previous year, unless they had substantiated conduct issues, the report said.

So clearly, Mazur has reason to be concerned. The IRS is a complete mess. The question, though, remains...what will be done about it?