The IRS gets a big boost in funding

Last week, President Biden signed into law a Democrat-backed budget reconciliation bill that includes $80 billion in additional IRS funding over the next decade, nearly doubling the agency’s current budget.

According to the Treasury Department’s plan, part of the funding will go to hire 87,000 workers across all categories, including agents and administrative staff. The IRS currently has ~80,000 employees, but some 50,000 of them are eligible for retirement over the next five years.

🤑 Follow the money... In a statement, the Treasury Department said the new funding “will crack down on tax evaders among the wealthy and large corporations, invest in technology upgrades that help taxpayers, and hire more customer support staff to prevent backlogs."

• The IRS is currently facing a backlog of 21+ million unprocessed 2021 tax returns, and government figures show the agency answered just 10% of taxpayer phone calls during the 2022 filing season.

📑 Does this increase my chances of being audited?... Short answer: yes, across all tax brackets. Treasury and IRS officials have promised new funds for tax enforcement won’t increase “audit rates” on Americans making less than $400,000… but that doesn’t mean the total number of audits won’t go up (and they will).

• When the bill was being debated in the Senate, Republican Sen. Mike Crapo (ID) introduced an amendment that would prohibit any of the new funds from being used to audit Americans with taxable incomes below $400,000; it was later rejected via strict party-line vote.
• Per the nonpartisan Congressional Budget Office, Sen. Crapo’s amendment would have reduced tax revenues by $20 billion over the next decade. In plain English, that total represents the extra tax revenue that’ll be collected from Americans earning <$400,000 as a result of the new IRS funding.

What’s not going to increase is “the share of small business or households below the $400,000 threshold that are audited relative to historical levels,” per Treasury Secretary Janet Yellen, who has the final say in the matter. And it’ll take some time before taxpayers see increased audits, as newly-hired IRS agents aren’t fully productive for the first three years of their career, per the CBO.

📸 Big picture: The nonpartisan CBO estimated the increase in IRS funding over the next decade will result in an additional $200 billion in tax revenue over that same period.

📊 Flash poll: Do you agree with the decision to increase IRS funding by $80 billion over the next decade?

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