Tax rebate could end up costing the IRS

A proposed tax rebate could be very expensive for the IRS, according to IRS Commissioner Charles O. Rossotti. Rossotti said a proposed $85 billion tax rebate, if enacted, would result in "some sizable costs" for the agency over the short-term, including postage and printing costs associated with sending every taxpayer a refund. Rossotti's comments came Wednesday during a House Appropriations subcommittee hearing on the IRS' fiscal 2002 budget. Senate Republicans and some Democrats support a one-time tax rebate this year of roughly $300 per person to bring immediate relief to taxpayers. In April, the Senate voted to include an $85 billion tax rebate along with a plan to cut taxes by $1.18 trillion over the next 10 years. President Bush has said that while he likes the idea of a one-time tax rebate, he does not want it to come at the expense of his proposed tax cut. Lawmakers, agency leaders and officials from the General Accounting Office have voiced concern over the IRS' antiquated business systems, a decline in tax audits during fiscal 2000 and staff shortages. President Bush's fiscal 2002 budget proposes $9.3 billion for the IRS, including $397 million for information technology investments. Although GAO has praised the IRS for its overall efforts at modernization, it has also been critical of last October's IRS reorganization when the agency restructured its research offices but left key leadership positions vacant. Moreover, staff shortages plague the agency, according to a new GAO report on the IRS' research operations. GAO also said employees in the agency's research units lacked appropriate skills and that the agency faced significant succession planning challenges. Rossotti, who agreed with GAO's findings, was nonetheless optimistic during Wednesday's hearing on the future of his agency and its modernization effort. "This year's filing season has been the best, both quantitatively and anecdotally, that the IRS has provided to the American taxpayer," he said. Rossotti said one-third of the tax returns for 2000 have been filed electronically so far and that the number of forms and instructions downloaded from the agency's Web site was up 100 percent from last year. The biggest change over the past year, however, was in the agency's attitude toward accomplishing its mission, Rossotti said. "The uncertainty about the future of the IRS has been reduced. We have more confidence in our ability to attain our goals now than we did a year ago," he said.