WASHINGTON — The IRS will use part of its new $80 billion influx of cash to fully staff in-person help centers, increase phone and online services and assemble a team of experts to guide the agency’s customer service efforts, Treasury Secretary Janet L. Yellen announced Thursday.
Speaking at the IRS’ New Carrollton facility in Lanham, Md., Yellen emphasized that Democrats’ budget infusion for the tax-collecting agency will allow it to modernize, moving away from aging computer systems, over-reliance on paper filings and traditional mail, and other outdated practices.
Democrats’ climate, tax and health care law containing nearly $80 billion for the IRS “provides the funding to transform the IRS into a 21st-century agency,” Yellen said. “While all the improvements won’t be done overnight, taxpayers can expect to feel real differences during the next filing season.”
Over the next six months, Yellen said such differences will include:
— Fully staffing all IRS Tax Assistance Centers to triple the number of taxpayers they can serve to 2.7 million.
— Hiring customer service agents to cut phone wait times and answer 85% of calls, up from just 10 to 15% during the latest tax filing season.
— Automating the scanning of millions of individual paper returns to speed processing.
— Allowing more online correspondence.
— Assembling a council of private sector customer service experts to advise the IRS.
GOP criticism
Yellen’s speech comes as Republicans take aim at Democrats’ IRS budget boost, arguing it will lead the government to hire an “army” of new auditors that the American people don’t want.
GOP campaign operatives have been hammering vulnerable Democrats on the issue for months, blasting out estimates that the IRS could hire as many as 87,000 new “agents” with the cash infusion.
“Abigail Spanberger is fully aware the Inflation Reduction Act will hire an IRS army to audit middle-class Virginians and has no qualms about lying to her constituents about it,” National Republican Congressional Committee spokeswoman Camille Gallo said in a statement this week.
The NRCC was responding to Spanberger’s recent comments to MSNBC’s “Morning Joe” calling it a “lie” that the new law would lead to hiring 87,000 armed IRS agents. Spanberger, a Virginia Democrat, faces a tough race in a swing district; Inside Elections with Nathan L. Gonzales ranks the contest “Tilt Democratic.”
The 87,000 figure comes from a May 2021 Treasury Department analysis of the administration’s funding request and represents total full-time employees that could be added through fiscal 2031, not just in an enforcement capacity but also in customer service and other roles.
Democrats also point out that many of the new hires will simply be replacing IRS staff who are planning to retire in the coming years.
Not all of the additional funds go to tax enforcement under the new law. Of the total new $79.6 billion appropriation over 10 years, $45.6 billion is for enforcement. Another $3.2 billion is set aside for taxpayer services, $25.3 billion is for operations support and $4.8 billion would go toward systems modernization.
Yellen aimed to spotlight the taxpayer service improvements that the money will bring, after access to IRS help and tax filing wait times faltered in recent filing seasons amid the COVID-19 pandemic and years of stagnant funding from Congress.
She praised IRS workers’ efforts through the pandemic and thanked staff in light of a recent uptick in threats to their safety. After Democrats passed the bill containing new IRS funding in August and Republicans and others on the right publicly blasted the move, the agency announced it was conducting a safety review.
Taxpayer audits
The nonpartisan Congressional Budget Office estimated the almost $80 billion investment will generate almost $180.4 billion in revenue over a decade, from both increased audits and better voluntary compliance.
Yellen pledged that the funds won’t be used to increase the rate of audits for households making less than $400,000 per year relative to “historical levels” and said she expects rates for those taxpayers to decline when the IRS improves its technological infrastructure down the line.
Instead, she said it will go toward embarking on more complicated investigations of wealthier taxpayers, whose income is often less visible to the agency than people who earn traditional wages.
“The world has become more complex, and enforcing tax laws is just not as simple as it was a few decades ago,” Yellen said.
Republicans have argued that if Democrats don’t intend to audit more people making less than $400,000 per year, they should write that into law. The top GOP member of the Senate Finance Committee, Sen. Michael D. Crapo of Idaho, introduced a bill this week that would add language barring the $80 billion from being used to audit those taxpayers.
The Congressional Budget Office reported in late August that a restriction written into law would’ve lost about $4 billion in revenue. That was in part because it would constrain the IRS’ enforcement activities, which might find when auditing a taxpayer who reported less than $400,000 in income that they in fact made more and could also promote underreporting of income.
The CBO said even though it estimated the IRS will generally follow Yellen’s pledge not to audit middle-income households, keeping audits at “historical levels” does mean they’ll rise more than if none of the funding could be used to audit people with taxable income of less than $400,000.
That’s because the CBO’s “baseline” forecast, prior to enactment of the reconciliation law, assumed the IRS would “broadly reduce its enforcement activities over the next decade” because of a projected shrinkage in funding relative to growth in taxable income, the August letter explained in a footnote.
