The IRS released details Thursday on how it plans to spend $80 billion on improved operations, pledging to hire more customer service representatives and audit more wealthy taxpayers.
Some improvements have been long expected, such as bringing more paper-based systems online and answering taxpayers’ phone calls promptly. Others are more ambitious, like exploring ways to create a government-operated electronic free-file tax return system.
Since President Joe Biden signed the measure, known as the “the Inflation Reduction Act,” in August, some Republicans have claimed without evidence that the IRS would use the new money to hire an army of 87,000 tax agents with weapons to harass middle-class taxpayers. New IRS Commissioner Daniel Werfel said it will not include spending for new agents with guns.
That figure came from a plan the Treasury Department proposed in 2021 to bring on 87,000 IRS employees over the next decade if it got the money. At least 50,000 IRS employees are expected to retire over the next five years.
The strategic plan released Thursday does not include final numbers on long-term hiring.
During a call with reporters, Treasury Deputy Secretary Wally Adeyemo said during a conference call that the plan “is heavily driven by the fact that we need to make technology investments that will improve productivity, which will mean that over time the number of employees and the mix of employees at the IRS will change.”
After Congress passed the legislation last summerTreasury Secretary Janet Yellen directed the IRS to develop a plan outlining how the tax agency would overhaul its technology, customer service and hiring processes. Her memo sent instructions to IRS leadership not to increase audit rates on people making less than $400,000 a year annually.
Officials are promising not “to raise audit rates on small businesses and households making under $400,000 per year, relative to historic levels.” The report says more than half of the new money — $45.6 billion — will be devoted to pursuing high-wealth taxpayers and companies.
“Given the size and complex nature of these tax filings, this work often requires specialized approaches, and we will make these resources available,” the report said. “We will use data and analytics to improve our understanding of the tax filings of high-wealth individuals.”
The strategic plan lands 11 days before the 2022 tax filing deadline. The IRS said 80 million Americans have filed their 2022 returns so far and the government has issued $172 billion in refunds — about 9% less than at the same time last year.
“Funding will more than pay for itself”
Additional money for the IRS has been politically controversial since 2013, when the agency during the Obama administration was found to have scrutinized political groups that applied for tax-exempt status. A report by the Treasury Department’s internal watchdog found that both conservative and liberal groups were chosen for close review.
Jean Ross, senior fellow at the Center for American Progress, said in an emailed statement that “the funding will more than pay for itself by ensuring that the IRS can hold the very wealthy and large corporations accountable.”
Erin Collins, the national taxpayer advocate, wrote in a blog post that even though the plan focuses disproportionately on enforcement, “for the first time in my 40 years as a tax professional, the tax administration stars seem to be aligning.”
