Joining Live to respond to the Internal Revenue Service commissioner’s opinion piece and examine the agency’s funding from the Inflation Reduction Act is Joel Griffith, a research fellow in the Thomas A. Roe Institute for economic policy studies at The Heritage Foundation.
RACHELLE AKUFFO: The Internal Revenue Service (IRS) is responding to criticism from Republicans on the new funding of $80 billion that it got as part of the Inflation Reduction Act.
Now, the commissioner of the Internal Revenue Service, Chuck Rettig, has published an opinion piece on Yahoo Finance in which he writes, quote, “The recent debate over providing badly needed funding to the IRS is filled with outright false suggestions about what the agency and our hardworking employees do, as well as how the additional resources will be handled.”
Now, please welcome Joel Griffith who has arrived to join us. At the Heritage Foundation’s Thomas A. Roe Institute for Economy Policy Studies, Joel is a member of the institute’s research fellowship program. We appreciate your presence here with us this afternoon.
So I wanted to begin by getting your response because a lot of people, when they saw this infusion of $80 million, were thinking, this means that the Internal Revenue Service is going to come after me. So I wanted to get your take on it first. Has this helped to clear up many of these myths to a significant degree?
JOEL GRIFFITH: No, sadly, the commissioner’s opinion piece that was published on Yahoo Finance completely destroyed his professional credibility because it was riddled with distortions, half-truths, and a large number of arguments based on straw man reasoning.
And today was the day that I really focused on going through this and breaking it down into its component parts.
In addition, the unfortunate reality is that this additional $80 plus billion for the hiring of 87,000 new tax agents is going to be a serious threat to American families and small business owners. In addition, I strongly suggest that everyone take a look at what has occurred in the past.
If you look at the audit data, you’ll see that the majority of audits have actually targeted individuals who have reported an adjusted gross income of less than $75,000. We know this because of the audit data.
Furthermore, we are aware that much more scrutiny has been directed toward sole proprietorships, small businesses organised as S corporations, and partnerships than has been directed toward large firms organised as C corporations.
This is something that we will have to look forward to in the coming years as the Internal Revenue Service will be doubling the size of its agent task force.
DAVE BRIGGS: Why should you be concerned about an audit if you have been completely honest while filing your taxes?
JOEL GRIFFITH: You should know that the magnitude of that tax law is massive if you ever give it any thought at all.
Both the tax code and the rules it imposes total hundreds of pages. If you consult, for example, five different attorneys regarding the amount of back taxes you owe and the types of deductions you are eligible for, those five attorneys are likely to provide you with a total of twenty distinct perspectives on the matter.
And the reality is, depending on which actual agent is looking over your taxes, you might get 20 different opinions from those 20 different agents. And that’s just the start of the problem.
And the bottom line is that if you get audited, even if you have been paying your taxes as you owe, even if the Internal Revenue Service agrees with you at the end of the day that you’ve paid the taxes that you owe, the fees that you can rack up in terms of lawyer fees and accountant fees can easily run $20,000 or more.
This is the case even if you have been paying your taxes as you owe. That is a significant amount of money for someone who makes a living, even only their typical wage.
However, if you are the owner of a small firm, especially if you have six or seven employees, it is highly unlikely that you have a lawyer or accountant working for you full-time. And that twenty thousand dollar audit fee can really set you back, whether you’re an individual or the owner of a small firm.
RACHELLE AKUFFO: But do we have any idea, in terms of the numbers involved here, such as how many people could actually be anticipating receiving a tax bill of that kind as a result of this?
JOEL GRIFFITH: You will not only be responsible for paying that tax bill, though. It’s just the threat, in general, that’s a problem.
If you are a small business owner and you are aware that an audit could be coming after you, that you will have to spend hundreds of hours that you should be devoted to growing your business,, instead, you are going to have to be poring over paperwork during your working hours and at night with your lawyers and accountants, trying to escape what might be an enormous tax bill that, potentially, you don’t even owe, then the very threat itself is going to weigh on small business owners. If you are a
You should be prepared for the overall number of audits to double or even more than double if we end up doubling the size of either that task force or that agent force.
In point of fact, if you take into consideration the overall number of 87,000 new agents that are going to be hired, this equates to approximately one new agent being hired for every 1,500 households. Basically, one new agent is going to be patrolling every neighbourhood in this country, and that threat alone is going to put a heavy burden on people.
DAVE BRIGGS: You are aware, Joel, that the Internal Revenue Service (IRS) has suffered budget cuts year after year, if not decade after decade.
And this is the reason why we have had a backlog in terms of the documentation that has been several years, at times, long.
They have not been able to provide you with your returns promptly sufficient to meet your expectations. If you hire additional agents, you will receive your money much more quickly. Do you not want the Internal Revenue Service to have sufficient funding?
JOEL GRIFFITH: Well, unfortunately, we know that almost 70% of these funds – and this is actually in the commissioner’s letter – up to 70% of these funds are going to be used for hiring more auditors and more agents, rather than hiring customer service agents, as you just mentioned. This is up to 70% of these funds that are going to be used for hiring more auditors and more agents.
Naturally, if I have a question, I would like the Internal Revenue Service to swiftly pick up the phone and assist me.
However, according to the estimates provided by the Internal Revenue Service (IRS), the majority of this money will be allocated to auditors; these are the individuals who will be harassing businesses as well as families to collect taxes.
Very little of that will be allocated to the modernisation of technology or to the hiring of customer support representatives.
DAVE BRIGGS: According to the Internal Revenue Service, 50,000 people are planning to retire in the next few years. Should we not look into replacing them?
JOEL GRIFFITH: If you take a look at this cash, you’ll notice that it’s in addition to the money that would already be allocated to the Internal Revenue Service (IRS).
Therefore, the funding necessary to keep the current total number of agents as well as the current total number of auditors is already in place.
The overall tally is going to rise as a result of the inclusion of this package. This is beyond the capabilities of the existing force. In point of fact, throughout the next ten years, we may anticipate that the Internal Revenue Service will hire additional auditors on top of replacing those who leave the agency due to retirement.
Keep in mind that this is an attempt to deceive the people of the United States. The only way that this expenditure package can be considered to be “paid for” is if individuals are required to make additional financial contributions in the form of taxes. And at the Heritage Foundation, we have thoroughly investigated the previous audit data to determine who exactly it has been focusing its attention on.
And if those numbers hold true moving forward with the new auditors, you can expect that an average family over those 10 years can expect to see approximately $2,000 additional taxes each and every year, as you’re going to have an increased risk of having an IRS audit shakedown. This is because you’re going to have an increased risk of having an audit shakedown.
RACHELLE AKUFFO: Now, Joel, you mentioned some of the inconsistencies that can sometimes lead to some of these audits. Can you give us some examples of these inconsistencies?
However, this investment that they are anticipating in some of these improved information technology systems is actually intended to make some of these audits go down, and it is also expected to make it easier to comply with some of these rules. Therefore, why wouldn’t something like that is a decent investment?
JOEL GRIFFITH: Yes, it is an excellent point for the commissioner to consider because even if thirty per cent of the monies will be allocated to hiring more customer service type agents and business modernization, the whole funds will be allocated to these two areas. Seventy per cent of these expenditures are allocated to the hire of additional auditors.
Therefore, the fact that, on the one hand, they are attempting to fund modernization does not make any sense.
On the other hand, the majority of these funds are going to be used to pay for auditors. This is going to happen. The tax code is so complicated, and there are so many interpretations of it, that you can get 20 different legal opinions from the same group of lawyers. This is something we need to keep in mind.
DAVE BRIGGS: Are you concerned, Joel, that this kind of language puts the jobs of employees who are trying their hardest to do their jobs and who are putting in long hours at the Internal Revenue Service (IRS) in jeopardy?
JOEL GRIFFITH: I’m concerned about regular families, and I’m concerned about small business owners who have to go through each and every quarter and each through every year in fear that an IRS agent will come after them and take up their valuable time and their valuable resources to force them to fork over more money to the federal government.
I’m also concerned about people who don’t have a lot of money, to begin with, and I’m concerned about people who don’t have a lot of That they are going to be forced to be concerned about these IRS agents and the lawyers working for the government, who are going to freeze their accounts —
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DAVE BRIGGS: Alright, that’s fine.
JOEL GRIFFITH: —and preventing people from earning a living in any way, shape, or form. This is the aspect that worries me the most.
DAVE BRIGGS: I’m afraid we’ll have to leave it there. Thank you so much for your time, Joel Griffith. Now it’s your turn, Seana
