By Judy Clabes
NKyTribune editor
In a move that will impact 1800 employees of 4100 in the metropolitan area, the IRS says it will close down its “submission processing operations” in Covington by 2019.
For the 2017 filing season, the IRS will hire temporary employees at the facility rather than permanent employees.
Cost savings over five years for shutting down Covington, Fresno, California and Austin, operations is about $266 million and subsequent savings over $53 million, the IRS says.
Two processing operations will remain at Kansas City and Ogden, Utah.
The IRS says the move is part of a consolidation effort that began in 2003 as more tax returns are filed electronically and paper filing continues to diminish.
The processing center sits on nearly 23 acres of prime real estate in downtown Covington. Other IRS offices are in the Gateway Center downtown, and employees in that facility are apparently not affected.
The statement also said that some of the lost “submission processing” employees could be accommodated in other positions with IRS operations that remain.
“This is distressing news for our members, many of whom have been loyal IRS employees for years,” National Treasury Employees Union President Tony Reardon said in a statement Wednesday, pledging to “aggressively pursue all available measures to avoid or mitigate the impact of these closings on affected employees in these three locations.”
While the IRS-owned facility will be vacated and hopes are high for turning it into developable real estate that will enhance downtown Covington and create more jobs, that process can be lengthy and onerous. See this web site in which the GSA describes the Disposal Process for “excess property.” While not every “excess property” goes though each of the steps, it is a process that could take as much as ten years, according to one source.
The process cannot even begin until the facility is vacant.
Given that Covington has about 20,000 jobs, the city is looking at a loss of up to 10% of its workforce. That impacts payroll tax revenue for the city.
According to the payroll tax returns filed by the IRS with the Covington Finance Department, the average annual wage of IRS employees at the Covington location is approximately $35,000 a year, although the exact breakdown of the IRS jobs between the flat top facility and the Gateway Center is not known. The potential loss of $1.5 million of annual payroll tax revenue would have to be offset by new jobs and property tax on the 23-acre riverfront site.
The complete IRS statement:
As part of the continuing efforts to use resources efficiently, the IRS is taking steps to further consolidate submission processing operations across the country as electronic filing continues to grow and fewer taxpayers file paper tax returns. These consolidation efforts began in 2003, leading to the consolidation of 10 sites into five locations that process paper tax returns.
In the next step of the process, the IRS has identified three more locations for consolidation through 2024 given anticipated decreases in future workload as labor-intensive paper processing continues to decline. The percentage of individual tax returns filed electronically grew from 58 percent in 2008 to 86 percent in 2015, representing 128 million 1040 forms. The IRS anticipates the trend away from paper filing continuing in future years.
Following a detailed review over several months covering factors ranging from employee impact, cost savings and building conditions, the IRS plans to continue the site consolidations by ending submission processing operations in Covington, Ky., in 2019, Fresno, Calif., in 2021 and Austin, Texas in 2024. By planning ahead, the IRS can minimize employee impact. In the past closures, many of the submission processing employees have been able to transition into other positions at the IRS.
The IRS emphasizes that submission processing is only part of our wider operations in these three locations, and the IRS will continue to be a major employer in these areas due to work for other parts of the agency. To minimize employee impact moving forward, the IRS will be hiring temporary employees, as needed, for the 2017 filing season in the Covington and Fresno submission processing operations rather than hiring permanent employees. The IRS will be working with NTEU during this process to offer mitigation strategies and provide new opportunities to affected employees.
At the end of this process in 2024, the IRS anticipates maintaining two submission processing locations. The Kansas City site will focus on individual tax returns, and the Ogden, Utah, location will focus on business tax returns.
The IRS projects the five-year cost savings from consolidating the three sites will be about $266 million, including factors such as real-estate and rent savings. Annual savings in subsequent years are projected to top $53 million. The IRS anticipates these savings will be used to focus on continuing IRS needs for taxpayer service, tax enforcement and information technology. Overall, the IRS continues to face smaller budgets, with the budget decreasing $900 million since 2010, which has led to the IRS workforce already being reduced by 17,000 positions.
The IRS currently has about 1,800 submission processing employees in the Covington area out of more than 4,100 in the metro Cincinnati area. The IRS strongly emphasizes that in the past consolidations, many of these employees were able to get jobs elsewhere within the IRS.