The IRS unveiled its strategic operating plan to spend the $80 billion in agency funding it was allocated over 10 years in the Inflation Reduction Act of 2022. The 146-page plan provides estimates of how the funds will be allocated, in addition to timetables for initiatives to boost customer service, technology, hiring and enforcement.
The agency indicated its plans to increase audits of high net-worth individuals, businesses, and complex cases and not to increase audit rates on those making under $400,000 annually or small businesses. These individuals and businesses should not be worried about increased IRS audits.
The $8.7 billion IRS spending plan for fiscal years 2022, 2023, and 2024 includes nearly $3.5 billion (40%) for operations support; $1.78 billion for enforcement (20%); and almost $1.7 billion each (19%) for taxpayer services and technology modernization.
The three-year budget takes into account that circumstances and needs will change as improved technology changes the focus. For example, fewer workers will be needed to key in paper returns, or people answering phones could be reallocated to taxpayer assistance centers as more processes are automated.
The long-term reduction in staffing and resources at the IRS impacted enforcement, where the agency has 2,600 agents who work directly on cases involving certain individuals, large partnerships, and large corporations. That compares with nearly 5,000 of these agents in 2010.
Simultaneously, the number of individuals making over $10 million increased to 30,600 from 13,300 a decade ago. The number of large partnerships and S corporation filings jumped to 300,000 from about 175,000, so the IRS needs to concentrate on those both to catch up and to help close the tax gap.
In addition, the agency still needs to focus also on its short-term need to reduce its backlog of amended tax returns and correspondence.
IRS $80 billion spending plan
Key takeaways from the plan include:
Customer callback coverage. The IRS says it now provides a customer callback option for 75% of calls to IRS live assistance toll-free telephone lines and plans to expand coverage to 95% of taxpayers calling for toll-free live assistance by the end of July 2023.
Online accounts. Taxpayers will have access to secure online accounts where they can view account and profile information, make changes, interact with the IRS, and manage preferences for payments, refunds, and communications.
Additional staff. The IRS will expand capacity in the Office of Chief Counsel and within the Department of the Treasury Office of Tax Policy to address more taxpayer questions proactively, using both formal and informal legal guidance and rulings.
Tax professionals and clients. The IRS will allow tax professionals to view status information for their clients. It will also give taxpayers the ability to authorize tax professionals to track status information for them through the online Tax Pro Account platform.
Taxpayer notifications. The IRS will send taxpayers notifications about potential issues as they file returns to help them correct errors and claim credits and deductions for which they are eligible.
Online Notices. It will add digital copies of all notices to online accounts and create digital copies of all notices so that taxpayers and authorized third parties can access them online.
Transformation and Strategy Office. Implementation will be coordinated by a newly formed Transformation and Strategy Office that will support IRS leadership.
Questions?
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