In August 2022, President Biden authorized $80 billion in funding to the Internal Revenue Service over the next ten years.
The funding is based on estimates in a U.S. Department of Treasury report from May 2021, outlining the President’s proposed initiatives to increase tax compliance and the funding required to implement them. It includes modernizing current technology, increasing data analytics use, and hiring agents to enforce civil and criminal tax laws. It’s estimated 87,000 new employees will be hired across all departments.
The announcement of new IRS employees stoked fears of government overreach, resulting in misinformation becoming a political catalyst.
Let’s Look at Where The $80 Billion To The IRS Is Going
The IRS is not hiring 87,000 gun-toting employees to initiate audits against low-income, working-class taxpayers and small businesses. Hiring 87,000 employees will bring the staffing levels to status quo, with many positions serving as replacements for an aging IRS workforce reaching retirement. The IRS has been understaffed and underfunded for many years, leaving it unable to maintain normal levels of tax enforcement, including audits of tax returns (which have decreased).
While some of the funding may be used to hire Special Agents—IRS employees in the IRS’s Criminal Investigation Division that carry guns in connection with investigations of criminal activity—the IRS will hire Revenue Agents and Tax Compliance Officers. Just recently, the IRS announced a goal to invest in technology allowing many more people to file their taxes directly through the IRS, saving taxpayers sometimes significant filing fees. Bold initiatives such as these will be funded through the increased budget allotment.
The intent of the increased budget is not to increase audits among all taxpayers. The main priority is to increase enforcement efforts against high-income individuals, some of the most significant contributors to the tax gap (generally, the difference between the tax owed and paid). Less than 1% of all tax returns face an audit.
This budget increase is not going to have an immediate effect on the IRS’s activities. It will take the IRS many years to hire and train these new employees, particularly those required for complex enforcement and tax evasion cases. It will take time, and the changes will likely go unnoticed by most taxpayers.
Contact Anderson & Jahde for competent, professional tax help if you have any questions.