IRS announces major overhaul, layoffs

IRS officials announced a massive restructuring plan Wednesday, which will result in 2,400 layoffs at the tax agency.

The IRS plans to close its Memphis, Tenn., tax return processing facility in October 2005, and will significantly streamline collections procedures, Commissioner Mark Everson said. In 2005, the agency will shift collection and insolvency caseworkers currently spread among 92 different offices into four locations. These changes, made possible by a substantial growth in electronic tax filing, are "fiscally responsible" and will allow the agency to hire new investigators, Everson said.

"Consolidation of back-office case processing is the kind of thing done years ago in the private sector," Everson said. He added that services to taxpayers would not suffer from the restructuring.

But the IRS overhaul would affect 6,700 of the agency's employees, about 6 percent of its 115,000-member workforce. Of these, 2,400 employees should expect to face involuntary separations after January 2005, Everson said. Most of those employees work at the Memphis center, and nearly 2,000 are seasonal or contract workers.

The National Treasury Employees Union, which represents IRS employees, vowed to fight the layoffs. "Most of the employees targeted by these actions are women and minorities who have probably worked for the IRS for most of their careers," NTEU President Colleen Kelley said.

Rates of electronic filing may have actually leveled off, Kelley explained, rendering the IRS' decision "premature." About 4 million taxpayers filed their returns electronically in 1990, according to the IRS. By 2003, that number jumped to 53 million.

But the General Accounting Office recently concluded that only 61 percent of individual taxpayers will file returns electronically by 2007, nearly 20 percentage points below the IRS' goal for online return rates. "It is premature to start talking about eliminating workers that taxpayers depend upon to process their tax payments and tax returns in a timely manner," Kelley said.

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