WASHINGTON — The Department of Treasury put out a report card this week, praising improvements made by the Internal Revenue Service (IRS).
Thanks to billions in federal funds earmarked for the agency in the Inflation Reduction Act (IRA), officials said they were able to increase their modernization efforts, reopen local Taxpayer Assistant Centers (TACs) in 14 states and dramatically improve customer service.
Former commissioner John Koskinen said the impact of the newly hired IRS staff is clear.
“The simple but expensive solution is to hire more people to answer the phone,” Koskinen said. “And that’s one of the first things the IRS has been able to do. And it’s worked well and, I think, benefitted taxpayers greatly.”
Democrats approved $79.6 billion in appropriation for the IRS last year in the Inflation Reduction Act. The extra money is supposed to improve the tax collection service’s operations and allow the agency to go after high-income individuals and corporations. Democrats said the increase in revenue would generate billions of dollars to cover environmental and health care programs included in the bill.
In a press release, the department noted that 5,000 workers have been hired so far, cutting call wait times down from an average of 27 minutes in 2022 to four minutes this season. Since the time of its reporting, the agency had answered 2 million more calls through live assistance compared to the previous year.
“It’s an important start and an indicator that the biggest challenge for the IRS over the last ten or 12 years has just been it doesn’t have enough people,” said Koskinen. “And that’s because it hasn’t enough funding.”
Still, Republicans want to claw back the money, and House Speaker Kevin McCarthy, R-Calif., vowed that he would act on those promises soon after he was elected House speaker.
“Our very first bill will repeal the funding for 87,000 new IRS agents,” McCarthy said.
Days later, House Republicans introduced and passed legislation known as the Family and Small Business Taxpayer Protection Act that would rescind the expansion of the IRS. They charged that all of those new IRS employees will be used to target middle-class families.
“The IRS doesn’t need more resources to go after taxpayers. What they really knew, what they really need to do is do a better job at what they’re administering,” Rep. Scott Fitzgerald, R-Wis., said. “Members of Congress get casework every day of the week related to the IRS not following through on something or doing something incorrectly. I’m not saying that overall, the entire agency is dysfunctional. I’m just saying, if you’re a member of Congress, you get an earful about the IRS on a regular basis.”
IRS heads, past and present, argue the Republican claims are not true. As outlined in the agency’s Inflation Reduction Act Strategic Operating Plan, a fraction of the new staff will be agents and it’s not looking to aggressively target people making less than $400,000 a year.
“The audit rate for very wealthy people, [making] over $10 million, has gone from like 20% to three or four, [making] $5 million and above the audit rates gone from like 13 or 16 to one,” said Koskinen. “So you have just thousands of very wealthy taxpayers, corporations, partnerships, who basically know their chances of being audited and dropped precipitously. And that’s where the audit rates been in freeze.”
The House Republican bill to repeal the new IRS funding will be dead on arrival in the Senate, which Democrats control, but the GOP could demand spending cuts in the IRS’s annual budget.
In the meantime, the treasury is celebrating the IRS being on track for its first “normal” tax season since the pandemic.