After the Inflation Reduction Act was passed in 2022, the IRS will receive nearly $80 billion in additional funding from now until fiscal year 2031 to catch up with backlogs, hire more employees, implement 21st-century technology, go after increasingly sophisticated tax cheats, and reinvent itself.
The IRS and agency published a Strategy Operational Plan in late March as part of their preparation for change, The Future of Taxes.
Revolutionizing the IRS
It plans major changes to enhance taxpayer services, swiftly address issues, utilize technology to work more efficiently, increase the staff, enhance the culture, and raise a lot more money from businesses, partnerships, and well-off individuals.
According to a letter from the new IRS Commissioner Daniel Werfel to Treasury Secretary Janet Yellen, the goal is to establish “world-class customer service where taxpayers can connect with the IRS in a totally digital manner if they desire.”
A customer-service staff that is maintained at right size and with the right resources and training to always be ready to meet the taxpayer demand for assistance will be maintained at the right size and with the right resources and training to be ready to meet the taxpayer demand for assistance.
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Aims to Collect More from High-Earning Taxpayers
But make no mistake: The majority of the funds, or nearly 60%, will be used to increase taxpayer control, including audits.
As indicated in Yellen’s directive from the previous year, IRS officers promise to concentrate their efforts on companies and people making more than $400,000 annually.
In accordance with Yellen’s direction, the IRS was forbidden from using the additional funds to raise the audit rates of small businesses or people with yearly incomes under $400,000 compared to historical levels.
The reduction of the tax gap, or the difference between what taxpayers are predicted to owe and what the government actually collects, is one of the main objectives of the Strategic Operational Plan.
The IRS has undertaken significantly less strict enforcement in recent years.
According to data from the Strategic Operational Plan, the audit rate for large corporations—which face challenging problems such as cross-border operations—fell from 10.5% in 2011 to 1.7% in 2019.
Likewise for those with means. 2019 saw a drop from 7.2% in 2018 to just 0.7% of taxpayers earning $1 million or more being audited.
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