The IRS will spend $80 billion over the next 10 years to increase staffing and upgrade technology in an effort to make the agency easier to deal with and fairer for all taxpayers.
“The IRS is committed to continuing to make investments so that you can deal with the IRS in an easier way going forward,” Wally Adeyemo, deputy secretary of the Treasury, told attendees at a tax forum in Washington on April 17.
At the same time, the agency expects to step up tax enforcement on the nation’s highest earners, who collectively underpay their taxes by an estimated $160 billion per year, according to Adeyemo. That’s more than the combined U.S. spending on the administration of justice, natural resources and the environment, and science, space, and technology.
Concerned that the IRS would use the $80 billion provided by the American Rescue Plan (ARP) Act of 2021 to harass conservative groups and increase audits on small businesses and average Americans, House Republicans voted in January to repeal the grant. The measure didn’t advance in the Senate.
To allay concerns on that point, IRS Commissioner Danny Werfel has stated that audits on taxpayers earning less than $400,000 per year wouldn’t be increased above historical levels.
“We know that the place where we need to do the most work is making sure that we increase our rates for the top 1 percent,” Adeyemo said.
Toward that end, the IRS will recruit tax attorneys, accountants, and data scientists, as well as invest in technology, according to Adeyemo.
“We’re going to use technology, machine learning, and other methods to look at pass-throughs and other complicated ways in which people look to hide their income [and] try and close the tax gap,” he said.
“One of the best ways to make sure that we’re more fiscally sustainable going forward is not necessarily to change policy but rather to enforce the laws on the books and to make sure that, just like the 90-something percent of Americans who receive W-2s, wealthy people also pay their fair share.”
Low staffing has been an impediment to equal enforcement of the tax code.
The agency is currently staffed at about the same level as it was in 1970, when the U.S. population was about 203.4 million people, according to Adeyemo. The population in 2020 was 331.4 million, an increase of 63 percent.
For an average wage earner, it takes about five hours to perform an audit, he said. But for those with the top 1 percent of earnings, it can take up to 250 hours just to prepare for the audit.
“Audits for millionaires are down 70 percent over the last decade or so,” Adeyemo said.
Customer service has suffered as well.
Already, the IRS has hired an additional 5,000 employees, aiming to make a dent in the customer service problems that have plagued the understaffed agency.
“We haven’t reached perfection, but we’re going to keep working,” Adeyemo said.
“When you look at the level of service in terms of phone calls being picked up, it was woefully poor, under 15 percent. This year we’re about 85 percent.
“We’ve answered 2 million more calls. We serve hundreds of thousands more people in person.”
Technology upgrades will also improve the agency’s taxpayer services.
“By the time we’re done with these investments, the IRS goes from an agency in which the technology infrastructure was built in the 1960s—before we had an ATM; before we had personal computers—to one that is a 21st-century agency,” he said.
“The IRS is committed to continuing to make investments so that you can deal with the IRS in an easier way going forward.”
