A report from the Internal Revenue Service released last week indicated that officials are devoting much of the agency’s recent funding windfall toward audits even as the degree to which the actions will impact everyday taxpayers remains uncertain.
President Joe Biden’s Inflation Reduction Act recently approved $80 billion for the tax enforcement agency. Treasury Secretary Janet Yellen previously said that the funding will enable staff members to upgrade information technology systems and more easily assist individuals and small businesses seeking to file their taxes; a report from the Treasury Inspector General for Tax Administration, however, indicated that the agency has not yet decided how the actions enabled by the funds will impact audit rates for middle-income taxpayers.
The document noted that the Inflation Reduction Act earmarked $45.6 billion, the majority of the new funds, toward enforcement activities that will empower agents to “determine and collect taxes owed.” Some $3.2 billion will be used to aid taxpayers with “filing and account services, pre-filing assistance, and education,” while $4.8 billion will be used for business systems modernization that “can be invested” in customer service technology.
The agency’s budget for enforcement activity will therefore increase 69% over the next decade, while the budget for taxpayer services will increase 9%. The remainder of the new funding will be used to cover the costs of rent, facilities, and telecommunications.
Yellen has previously vowed that the new resources will not be utilized to increase audit rates for American households earning less than $400,000 per year “relative to historical levels.” She failed to clarify that “historical levels” of enforcement were far higher as recently as one decade ago: audit rates for Americans earning between $25,000 and $200,000, for instance, decreased 76% between 2010 and 2019, according to data from the Government Accountability Office.
The document from the Treasury Inspector General for Tax Administration likewise reveals that IRS officials “have not yet finalized what constituted the $400,000 income level or what historic audit level will be used for its metrics,” further indicating that such matters are “still being discussed between the IRS and the Treasury Department.” The agency nevertheless believes there is not “an immediate risk” of violating the commitment because “employee attrition and hiring challenges will limit its ability to conduct more audits.”
An analysis of the document from the House Ways and Means Committee provided to The Daily Wire concluded that “when they have the numbers, they’ll perform the audits.”
“At a time when Americans are facing the double threat of sky-high inflation and an economy in recession, top bureaucrats at the IRS are huddling over how to spend their $80 billion windfall, and what technicalities they can use to justify auditing families and small businesses,” Ways and Means Committee Chairman Jason Smith (R-MO) said in a statement provided to The Daily Wire. “President Biden and Secretary Yellen need to come clean with the American public about the true extent of their enforcement plans and exactly how many middle-class families will be swept up in their audit scheme. The American people are already dealing with 40-year high inflation; the last thing they need is a visit from the IRS.”