The new funding will help the Internal Revenue Service fight tax evasion by the wealthy while vastly improving services for middle-class families, IRS Commissioner Danny Werfel said Thursday.
Werfel said it was too early to say whether the IRS would eventually hire the 87,000 employees who have become part of Republican talk about the government’s supposed “weapon” against ordinary Americans.
Instead, the new money would help the IRS “move toward a world-class customer service operation,” Werfel told reporters, noting that small business owners, regular wage earners and retirees have nothing to fear from increased enforcement of taxes targeting higher incomes.
“People who receive W-2 or Social Security payments or who have a small business shouldn’t have to worry about another wave of IRS audits — we’re taking that off the table,” Werfel said. “Our focus will be on other high-income areas for a period of time because there is a lot of work to be done in those more complex areas of tax law that will take years to complete.”
The agency’s $80 billion funding increase — a 69 percent increase over the previously projected budget — was a key part of the Inflation Reduction Act, a partisan bill passed by Democrats last year using a special budget process which allowed them to avoid Republican objections. The Congressional Budget Office said the money would help the IRS raise $200 billion in additional revenue, meaning the investment would pay for itself and also reduce the cost of the legislation.
The Republicans got their hands on one Treasury Department Report 2021 which estimated the additional funding would cover nearly 87,000 new IRS hires, suggesting the increase in IRS audits is part of a plot by Joe Biden to go after supporters of former President Donald Trump.
“The weaponization and politicization of federal agencies is egregious and appalling. These are Gestapo-like tactics”, Rep. Jeff Duncan (RSC) She said after the FBI raided Trump’s home in August for classified government documents. “If the FBI can do this to President Trump, what do you think 87,000 new IRS agents will do to the American people?”
The supposed 87,000 IRS employees have become so important to Republicans that the first bill they voted on after taking control of the House of Representatives this year was to repeal supplemental funding for the agency. The measure has no chance of passing the Senate or being signed by President Biden.
Biden has said he won’t support raising taxes on households making less than $400,000, and his administration has said major IRS funds won’t pick up audits of those households either, a pledge Werfel repeated Thursday.
“The IRS does not intend to increase the most current audit rate we have for families making less than 400,000,” Werfel said.
But Werfel did not say how many people the IRS plans to hire in total, suggesting that number could change based on customer service improvements, such as new online tools that could help people resolve problems with their returns faster than before.
“We don’t want to be stuck in numbers on a piece of paper because we want to see the benefits we get from technology and how we can build a flexible workforce that will help us meet the needs of the American people. and it also helps us generate revenue,” Werfel said in response to a reporter’s question.
Werfel said the number of IRS employees dropped from 95,000 employees in 2010 to 80,000 last year because of funding cuts on Capitol Hill. Meanwhile, the number of Americans making more than $10 million a year and the number of tax returns from complex business entities have grown exponentially.
When the IRS suspects that a tax official hasn’t paid what they owe, such as underreporting income, the agency takes a closer look, usually by sending a verification letter. The IRS sends a disproportionate amount of those letters to low-income people claiming tax credits, often asking them to justify their earnings.
Meanwhile, audit rates for large companies fell from 10.5 percent in 2011 to 1.7 percent in 2019, according to data from the IRS. Werfel said budget constraints have reduced the number of auditors reviewing complex cases from more than 5,000 a decade ago to just 2,600 today, and that the new legislation would help hire the accountants, lawyers, economists and data scientists needed for such cases. cases.
“The agency focuses on assessing the tax compliance of wealthy and wealthy individuals, complex partnerships, large corporations,” Werfel said. “The IRS does not intend to increase the most current audit rate we have for families making less than $400,000.”
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