​What’s the IRS Going to Spend $80 Billion On?

It seems the IRS isn’t on anyone’s list of favorite government agencies these days. And it’s hard to decide if the nearly $80 billion it will receive under the Inflation Reduction Act will allow taxpayers to like them more or less.

There are really two key things the agency’s hoping to accomplish with the money: “provide taxpayers with world-class customer service” and reduce deficits by hundreds of billions of dollars by pursuing non-compliance.

So, how does the agency aim to go about that? Here’s a look at some of the highlights from its 10-year strategic operating plan:

• Hire more pros — According to a recent statement, the IRS said it will “ focus the Inflation Reduction Act enforcement resources on hiring the accountants, attorneys, engineers, economists and data scientists needed to pursue high-income and high-wealth individuals, complex partnerships, and large corporations that are not paying the taxes they owe.”
  • The IRS reiterates that there won't be an increased chance of audit if you make under $400,000, but if you make over that, they plan to increase audit rates.
• Expand its phone coverage — The agency currently offers a call-back option for about three-quarters of the calls it receives. It wants to bump that percentage to 95% by the end of this June.
• Get more digital — You’ll have access to secure online accounts to view your account, make edits, manage your preferences, and communicate with the IRS.
• Upgrade technology -- The IRS has not kept up on technology. As they become more digital, they hope to be able to use fewer workers to perform manual tasks, like keying in paper returns.
• Help tax pros — Your accountant or CPA will be able to check your status information for you. You’ll also be able to give your tax professional authorization to track status details through the online tax pro account platform.
• Improve notifications — You’ll get more information about any potential issues with your returns. And you’ll get details about claiming credits and deductions you might qualify for. The agency also aims to add digital copies of all the notices to your online accounts.

The dollar breakdown looks something like over the next 10 years:

• $25.3 billion for operations support
• $45.6 billion for enforcement
• $3.2 billion for taxpayer services
• $4.8 billion for business systems modernization
• $0.5 billion for clean energy

Some have argued that the IRS actually needs a lot more than $80 billion because of “chronic underfunding.” IRS Commissioner Daniel Werfel wrote, “IRS funding has steadily declined over the last decade, causing suboptimal staffing and investment. In 2010, for example, we operated with 95,370 full-time employees to meet the demands of the U.S. population (310 million). Today, the IRS is almost 20% smaller (80,006 FTE as of the end of FY 2022), whereas the U.S. population has increased by over 7% (334 million), and the tax law has grown more complex.”

Questions about what the changes to the IRS might mean for your tax bill? Let us know.