Congress has handed the IRS more work and less funding, leading to a decline in taxpayer service, the tax agency’s independent in-house critic said in a new report.

The agency’s inability to provide clear, timely assistance to the public is the most serious issue facing the nation’s taxpayers, according to the annual report released today by Nina Olson, the national taxpayer advocate.

“Many taxpayers will be frustrated, some will make potentially costly mistakes, others will incur higher compliance costs when forced to seek information and assistance from tax professionals that the IRS previously provided for free,” Olson wrote in the report. “And still others will simply give up and not file returns at all.”

The woes at the Internal Revenue Service will be on display starting Jan. 20, when the individual tax-filing season begins. Obamacare’s mandate to purchase health insurance and the tax- credit subsidies for insurance took effect in 2014, and both issues are creating complications and questions for taxpayers.

About half of taxpayers who call the IRS this year won’t reach a person to answer their questions and those who do could wait 30 minutes, the IRS projects. That’s the worst forecast since the IRS began tracking such data in 2001, Olson writes.

The IRS has closed some walk-in assistance centers, limited employee training and made it harder for tax preparers to get their calls answered.

Poor Treatment

“If the government treats its taxpayers poorly, voluntary compliance almost certainly will erode over time,” the report says, noting that only 2 percent of tax revenue comes from enforcement. “There is a strong business case for the government to provide sufficient funds for taxpayer service to ensure that taxpayer needs are adequately met.”

In addition, the IRS is closing the last of its overseas taxpayer-assistance centers, saying that years of budget cuts have forced it to end a popular program designed to help U.S. citizens living or traveling abroad.

The closing of IRS offices attached to U.S. Embassies in London and Paris, as well as the consulate in Frankfurt, will allow the agency to reassign about a dozen employees to its domestic offices and save about $4 million a year, the IRS said in a statement.

Since fiscal 2010, Congress has reduced the IRS budget by 17 percent in inflation-adjusted dollars, according to Olson’s report.

The most recent 3 percent cut was part of the spending bill that Congress passed in December.

Republicans, who now control both chambers of Congress, have used budget cuts to penalize the tax agency for giving extra scrutiny to Tea Party groups seeking tax-exempt status.

Hiring Freeze

To cope with the budget cut, the IRS has a hiring freeze and is delaying information-technology projects, Commissioner John Koskinen wrote to employees yesterday.

Those cuts will mean that at least 46,000 audits won’t get closed and that the government will miss out on collecting at least $2 billion, Koskinen wrote. That’s about $6 lost for every $1 of budget cuts.

The IRS is planning for up to two furlough days between now and Sept. 30, which would mean closing the agency to the public. A final decision hasn’t been made.

“Refunds will be delayed, especially for taxpayers who file paper returns or for taxpayers with errors or questions on their returns,” Colleen Kelley, president of the National Treasury Employees Union, which represents IRS workers, said in a statement yesterday. “Tax cheats will have an easier time evading what they owe.”