One year after receiving a significant cash influx, the Internal Revenue Service (I.R.S.) has announced a notable increase in its full-time staff, reaching a level not seen in over a decade. This additional staffing comes as the I.R.S. focuses on hiring to address the agency’s budget and personnel decline in recent years.
The goal of this recruitment effort is to enhance taxpayer services and target wealthy individuals engaging in sophisticated tax evasion, according to Daniel Werfel, the I.R.S. commissioner. However, the agency’s future remains uncertain, as Republican lawmakers have expressed concerns that the I.R.S. may utilize its newfound funding to harass small businesses and middle-class families. As a result, $20 billion was cut from the agency’s budget, leaving the I.R.S. with $60 billion to implement its overhaul plans.
During a briefing with reporters, Mr. Werfel dismissed Republican fears about the agency’s intentions. He highlighted the I.R.S.’s recent achievements, such as digitizing paper tax filings and improving responsiveness to taxpayers, to dispel the myth of an aggressive agency looking to shake down average taxpayers.
The funding received by the I.R.S. aims to help the agency recover from significant budget reductions over the past years. President Biden believes that the additional funds will enable the agency to crack down on tax evasion, gradually reducing the projected $7 trillion tax gap over the next decade. While enforcement plays a crucial role, the I.R.S. is also focused on promoting its upgraded technology and improved service, such as digitizing tax forms and reducing wait times for callers seeking assistance. These efforts have resulted in average wait times dropping from 28 minutes to just 3 minutes during the 2023 tax season, along with the clearance of a backlog of over 20 million unprocessed tax forms in 2022.
To reinforce the notion of a more amicable I.R.S., Mr. Werfel emphasized that the agency recently announced it would significantly reduce unannounced visits by agents to homes and businesses. This measure aims to minimize tension between I.R.S. agents and taxpayers and combat scams by imposters pretending to be I.R.S. staff. Nevertheless, the I.R.S. continues to face substantial challenges as it works towards upgrading its operations and improving its reputation.
A recent report by the Treasury Inspector General for Tax Administration, an I.R.S. watchdog, highlighted significant deficiencies in safeguarding sensitive taxpayer information stored on microfilm cartridges at the agency’s tax processing centers. The failure to properly store or account for these cartridges raises concerns about the potential for tax refund fraud and identity theft.
Moreover, the I.R.S. has faced scrutiny this summer with two seasoned investigators harshly criticizing the Justice Department’s handling of Hunter Biden’s tax case. They accused the agency of shielding Mr. Biden from felony charges due to political reasons and preferential treatment. These agents claimed to have faced repercussions internally after disclosing their findings as whistleblowers.
Despite these challenges, the I.R.S. leadership remains committed to demonstrating tangible progress utilizing its new resources. This includes answering calls promptly and efficiently processing refunds. The agency’s current full-time employee count of nearly 90,000 represents a substantial increase compared to the 79,070 employed in 2022. It is worth noting that the I.R.S. has not had over 90,000 full-time employees since 2012, as per the 2022 I.R.S. data book. The majority of new hires have been in the wage and investment division, responsible for customer service. In this regard, the agency actively recruits staff from accounting and law firms, as well as data scientists to utilize mathematical tools in identifying taxpayers with potential audit-worthy returns.
Although the Biden administration lauded the first year of the I.R.S.’s modernization plan as a success, uncertainties persist. Ongoing funding remains a crucial factor. An agreement reached in June between the White House and Republicans included a rescission of $20 billion from the agency’s funding to prevent a default on the nation’s debt.
Regarding this funding cut, Mr. Werfel expressed confidence that it would not hinder the agency’s short-term ambitions. However, he acknowledged that further reductions in annual budgets could force the I.R.S. to allocate resources intended for agency modernization to fund daily operations. Nonetheless, Mr. Werfel remains optimistic that an upgraded I.R.S. will convince skeptical Republicans that investing in the agency yields positive outcomes for taxpayers.
Ref: https://www.tigta.gov/sites/default/files/reports/2023-08/2023ier008fr.pdf
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