IRS Will Keep Operating Even If Government Shuts Down

Internal Revenue Service building in Washington on June 28, 2023 Madalina Vasiliu/The Epoch Times

The IRS will most likely continue to work, and tax enforcers will still collect their paychecks even if the partisan gridlock on Capitol Hill fails to resolve and the looming government shutdown becomes fact, an official said.

Doreen Greenwald, president of the National Treasury Employees Union (NTEU), made the remarks in a press call on Sept. 18, noting that the IRS would probably use funds from the Inflation Reduction Act to remain fully operational in case of a shutdown and continue—without interruption—to go after people who don’t comply with the nation’s tax laws.

Ms. Greenwald added that the NTEU is still waiting for a final plan from the Treasury Department, while adding that she hopes lawmakers will strike a deal to avert a shutdown.

“Until they have a final plan, this weighs on employees’ minds,” Ms. Greenwald said, citing discussions with IRS officials.

Last year’s $1.7 trillion omnibus funding bill is keeping the government running until the end of fiscal year 2023, which ends on Sept. 30.

The massive bill, which totaled more than 4,000 pages, followed three smaller stopgap measures that kept the government operating until congressional leaders negotiated the final, bigger package.

Now, Congress faces an appropriations battle and must approve 11 major spending bills by Sept. 30. If House and Senate members fail to agree on any of the 11 bills, the government would technically be forced to shut down.

Congress would need to proceed at an average pace of more than one approval per working day to meet the deadline, with little confidence expressed on Capitol Hill that lawmakers will manage to pull it off.

“It’s important that we continue the pressure to make sure that our leaders, our elected leaders in Congress, do their jobs and make sure that they pass the appropriations timely,” Ms. Greenwald said on the call, referring to the challenge posed by the 11 spending bill approvals that remain pending.

Former President Donald Trump has voiced support for a government shutdown if lawmakers fail to strike a deal to address the nation’s $30-plus trillion in public debt.

“I think if they don’t get a fair deal—we have to save our country. We’re at $35 trillion in debt, we have to save our country,” President Trump said in an interview on NBC’s “Meet the Press.”

“I’d shut down the government if they can’t make an appropriate deal, absolutely,” he said.

Meanwhile, the IRS is looking to use some of the money from its massive $60 billion funding boost to ramp up enforcement of higher-earning Americans, hiring more tax enforcers, and leveraging cutting-edge technologies like artificial intelligence to target tax evaders more efficiently.

IRS Launches ‘Sweeping, Historic’ Tax Crackdown

In early September, the IRS announced that, thanks to the new funding, it’s launching a “sweeping, historic” tax enforcement initiative.

IRS Commissioner Danny Werfel said in a Sept. 8 statement that the tax agency has completed a top-to-bottom review of its enforcement efforts and is girding to catch people “abusing the nation’s tax laws.”

The new enforcement thrust is said to focus on higher-earning Americans and big corporations, with the IRS pledging not to increase audit rates for people earning less than $400,000 per year.

This has been an oft-repeated promise in the face of Republican assertions that working-class taxpayers would be subjected to tougher enforcement thanks to the tens of billions of dollars in additional IRS funding.

But the IRS’s pledge not to target Americans earning under $400,000 rings hollow, given a recent watchdog report calling into question the ability of the agency to make good on this promise because it either lacks a clear definition of “high-income” or uses outdated tax examination activity codes that put the threshold for high earners at $200,000.

Watchdog Warns

The Treasury Inspector General for Tax Administration (TIGTA), which is the watchdog overseeing the IRS, recently carried out a review to assess the IRS’s strategy to train employees hired to audit high earners and big businesses that underreport income.

The watchdog report includes scathing criticism of the IRS for lacking a clear definition of “high-income” earners.

“The high-income terminology is being used loosely inside the IRS with no common understanding of what the term means,” the watchdog said.

“The IRS does not have a unified or updated definition for individual high-income taxpayers,” the watchdog added in the report, which notes that the IRS uses different definitions of “high-income” depending on context as various IRS programs address different compliance issues across different parts of the filing population.

Also, the IRS continues to rely on old tax examination activity codes adopted half a century ago with the Tax Reform Act of 1976, which used a $200,000 threshold to measure high-income returns.

The tax agency argued in its rebuttal that a “static and overly proscriptive” definition of high-income taxpayers for audit purposes “would serve to deprive the IRS of the agility to address emerging issues and trends.”

The watchdog called into question the ability of the IRS to deliver on its pledge not to target people making less than $400,000 per year because the agency currently has “no way to identify the complete population of taxpayers that meet the criterion of $400,000 or more specified by the current Treasury Secretary,” who made the promise and issued a directive that put it in writing.

Meanwhile, the IRS recently announced hiring over 3,700 additional tax enforcers to target higher-earning taxpayers as the agency focuses its efforts on complex partnerships, large corporations, and—at least in theory—“high-income” tax evaders.