Paycheck Politics: Democrats Worry the IRS Will Game the New Tax Tables

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Olson said the IRS was still calculating the impact of the new law, but preliminary estimates said it would need an extra $495 million this year and next year to implement the sweeping overhaul of individual and corporate taxes.

In addition to dealing with the new tax law, the IRS must balance other priorities, including the president's May 2017 executive order mandating all federal agencies to meet certain cybersecurity requirements.

The IRS expects it will receive almost 155 million individual tax returns this season.

The Internal Revenue Service has estimated it may need almost half a billion dollars more over the next two years to implement the new tax law passed by Republicans and signed by President Trump just before Christmas, the agency's independent taxpayer advocate said Wednesday.

Prior to leaving the agency, former IRS Commissioner John Koskinen warned that years of cuts to the agency's budget will make it hard for the IRS to carry out its mission.

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But that does not mean the IRS has a year to get up to speed.

Olson said funding for the IRS has dropped by about 20%, in inflation-adjusted terms, since 2010. Funding cuts have rendered the IRS unable to provide acceptable levels of taxpayer service, unable to update its technology to improve its efficiency and effectiveness, and unable to maintain compliance programs that both promote compliance and protect taxpayer rights. "But with more funding, strong leadership and a closer working relationship with Congress, I am convinced the IRS can do the job well", Olson said. Even before the new tax law was passed, the agency expected to be able to answer about 60 percent of public calls during tax season and 40 percent for the full year.

Democrats this week also expressed concern that the new IRS withholding guidelines could be subject to political interference.

Olson also released a new publication, "The Purple Book", on Wednesday offering 50 legislative recommendations for strengthening taxpayer rights and enhancing tax administration. The IRS expects the earliest EITC/ACTC related refunds to be available in taxpayer bank accounts or on debit cards starting February 27, 2018, if they chose direct deposit and there are no other issues with the tax return.