Treasury Secretary Janet Yellen announced that the Internal Revenue Service will this week unveil its much-anticipated plan for spending the $80 billion in additional funding it has received to increase tax enforcement and services for taxpayers.
The funding will be used over the next 10 years.
While swearing in the IRS’ new commissioner, Danny Werfel, this week, Yellen delivered prepared remarks. She said that the Strategic Operating Plan for the IRS would outline what the agency plans to do with the money in much more detail than has been known thus far.
The investments will be focused on analytics and data so that it can better high earners, complex partnerships and larger corporations. As she said:
“The technology will be complemented by hiring more top talent, including accountants and attorneys. These additional resources will help us peel back complex corporate structures and large taxpaying entities – and make sure that they pay what they owe.”
The new funding the IRS will be getting over the next decade was allocated to the agency through the Inflation Reduction Act, which was passed through Congress using budget reconciliation in the Senate. The Democrat-led bill didn’t garner enough support from Republicans to avoid the Senate filibuster, so they just forced it through.
The goal of the funding is to improve tax compliance as well as the “tax gap” that’s continuing to shrink between what taxes are paid to the IRS and what is actually owed. The Treasury estimates that this gap is roughly $600 billion per year.
Since Republicans have taken over the House of Representatives, they’ve fought hard to try to repeal this funding as part of this-for-that negotiations with Democrats. What the GOP would give to liberals in exchange is an increase this year in the federal debt ceiling.
During her remarks, Yellen repeated what she has said in the past – that the money the IRS is getting wouldn’t be used to amp up the audit rates on small businesses in the country, nor on any household that earns less than $400,000 per year.
The Treasury Department has continued to emphasize that the initial spending will be done to improve the IRS’ customer service, which will include hiring an additional 5,000 employees who will staff various taxpayer service centers and answer telephones.
Yellen added that the overall plan for spending the funding would also focus on technology investments that would both automate and digitize various paper processes the IRS still uses. The technology would also hopefully notice mistakes that are made in taxpayer returns and help the IRS avoid audits that are unnecessary on “honest taxpayers.”
An official with the Treasury Department said in the first five years of the investment plan the IRS has, taxpayers will have the ability to file all their tax documents online as well as respond to any notices they receive – all in a safe and secure environment.
Their account history and tax data would also be available in a secure environment online for them to access as well. Currently, taxpayers who want this have to do so through tax preparers and other third-party providers if they want to file their returns electronically.