Federal Manager's Daily Report

A center in Cincinnati was closed last June; plans call for closing a center in Fresno, Calif., in 2021 and one in Austin, Texas in 2024.

The IRS is not achieving the savings it projected through consolidation of processing centers and already is unable to fill all positions at the centers whose workloads will grow as they receive work from those being closed, an IG audit has said.

The IRS is consolidating tax processing centers based on the continued decline in paper-filed returns, projecting five-year savings of $266 million from closing three centers, savings that management wants to use toward taxpayer service, enforcement and IT upgrades. A center in Cincinnati was closed last June; plans call for closing a center in Fresno, Calif., in 2021 and one in Austin, Texas in 2024.

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The IG found that the costs of closing the Cincinnati center “exceeded initial estimates by $56.5 million, reducing the potential five-year savings estimates to approximately $40.7 million.

Despite this, the IRS has not updated its cost-benefit analysis using actual costs to ensure that the decision to continue consolidating tax processing centers remains cost effective.” One of the major drivers of the cost increase at Cincinnati also applies to Fresno, it added.

It said the IRS “acknowledges that actual cost savings will be less than its original estimates, but believes cost savings and future cost avoidance will be realized.”

It added that the two centers to continue, in Kansas City and Ogden, Utah, have been failing to meet their filing season hiring goals in the last three years, achieving only 61, 64 and 50 percent combined.

After the full consolidation is complete, the hiring need for those centers will be about twice as high, the IG said, adding that “the inability to recruit and retain sufficient submission processing function personnel will continue to present significant challenges for the IRS.”

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