It has been a year since the Inflation Reduction Act was signed into law, allocating a significant cash infusion to the Internal Revenue Service (IRS). Now, as the congressional budget process continues, the IRS must effectively communicate the positive outcomes of this investment.
Commissioner Danny Werfel highlights several key improvements already achieved. Phone service has notably improved, with operators assisting 3 million more people compared to the previous year. Additionally, the IRS is expanding its capacity to call back customers instead of placing them on hold, enhancing overall efficiency. Furthermore, taxpayers will soon have the ability to respond to 51 types of notices and letters online, a significant increase from the 10 notices available earlier this year.
The agency has also begun to see results in its efforts to combat high-end tax evasion. Recently-closed cases against households valued at over a million dollars resulted in the collection of $38 million in back taxes. However, Werfel emphasizes that these accomplishments are just the beginning, as there is still much ground to cover.
President Joe Biden’s Inflation Reduction Act, signed one year ago today, allotted $80 billion in extra funding to the IRS over a decade. This funding is intended to rebuild staffing, upgrade technology, and enable stronger enforcement against wealthy households and corporations.
Read also: IRS targets employee stock-ownership plans
The IRS Faces Challenges Amid Funding Decrease
The Internal Revenue Service (IRS) is currently facing staffing and budgetary challenges. According to an agency spokesperson, the IRS is getting close to reaching a headcount of 90,000 full-time employees, but precise figures are not readily available. This would mark the first time in over a decade that the agency has reached this level of staffing. As part of recent hiring efforts, 5,000 additional phone assistants were brought on board.
Last year, legislation was passed in a partisan manner, with Democrats in control of the House of Representatives and the Senate. However, Republicans have historically been cautious about allocating additional funds to the IRS. Earlier this year, during negotiations to address the debt ceiling, the White House and House Speaker Kevin McCarthy agreed to reduce IRS funding by $1.4 billion, redirecting $20 billion of the $80 billion budget to other domestic spending priorities.
The upcoming budget battle also poses challenges for the IRS. A House appropriations bill proposes allocating $11.2 billion to the agency, which is $1 billion less than the current year’s funding. According to explanations provided by committee-approved bills, this reduction aims to restrain “wasteful spending.” However, left-leaning researchers at the Center on Budget and Policy Priorities suggest that House Republican proposals could ultimately curtail $67 billion in IRS funding.
IRS Commissioner Danny Werfel recognizes that it is possible for the agency to operate effectively with a $60 billion budget instead of $80 billion. Nevertheless, he raises concerns about the long-term implications of annual budget reductions. Without adequate funding, the IRS may be forced to rely on resources intended for taxpayer improvements to cover day-to-day operations. This would deplete valuable capital resources and hinder the agency’s ability to make necessary advancements in service delivery.