After Years of Painful Filing Seasons, Congress Finally Sees the Wisdom of IRS Modernization
The prompt for this round of the FEDforum is better late than never. This week, hear from the Professional Managers Association (PMA).
It is hard to recall a filing season in recent years that has gone smoothly. Year after year, the Internal Revenue Service (IRS) struggles to answer phone calls, process returns, and manage correspondence. The American people are frustrated, and lawmakers bring in IRS leadership to explain the reasons for the failures. The reasons have been the same for years: insufficient funding, outdated technology, and inadequate staff. After years of requests, this year Congress passed the Inflation Reduction Act to finally move the IRS in the right direction.
For over a decade, Congress consistently cut the IRS’s budget. In FY 2011, the IRS hit peak funding at $16.4 billion. Since then, the IRS funding has hovered between $12 and $13 billion. The IRS workforce has been similarly slashed. The Service went from some 90,000 full time employees in FY 2011 to less than 75,000 ten years later.
As Congress has learned: you get what you pay for.
The National Taxpayer Advocate, the Treasury Inspector General for Tax Administration, the Congressional Budget Office, stakeholders, former IRS executives, our association and organizations like it have spent many years warning Congress of dire consequences to taxpayer services in the absence of additional funding. In the Taxpayer Advocate’s 2021 Annual Report the Congress, each of the ‘Most Serious Problems Encountered by Taxpayers’ was underpinned by a lack of funding, resources, and critical infrastructure preventing the IRS from recruiting and retaining qualified personnel.
In April 2022, Congress finally took substantive action to improve IRS operations. The Inflation Reduction Act (IRA), if continually and properly funding, will make a significant difference in IRS operations.
The IRA will allow the Service to make modest, but important steps toward replenishing its ranks. The IRA funds 87,000 new IRS employees. Unfortunately, over the next six years, 52,000 employees are expected to exit the IRS workforce. Thus, if the IRS successfully hires 87,000 employees over the next ten years, it would really only be increasing its workforce by 35,000.
Still, this is critical for returning the IRS to peak staffing levels from 2011. Given the IRS was only able to respond to 9% of calls last year due to staffing shortages, the additional customer service agents should be a welcome reform.
The IRA also targets funding toward the areas the IRS needs the most assistance.
Roughly $3 billion is dedicated to enhancing the Taxpayer Advocate Service, IRS outreach and education, the IRS volunteer tax prep program, and other vital taxpayer services.
Roughly $4.8 billion is allocated to modernizing IRS systems and personalizing the taxpayer experience. This funding will enhance taxpayer call experiences, reduce hold times, and expand online offerings.
Roughly $15 million is allotted to allow the IRS to explore its own direct e-file tax return system. For the first time in American history, the IRS may one day provide a resource for tax preparation.
Roughly $25.3 billion is dedicated to enhancing IRS operations.
Roughly $45.6 billion will be dedicated to enforcement over the next nine years.
With this funding, the IRS can finally modernize its 60 year old computing system which operates on 60+ overlapping taxpayer databases. These modernization efforts will also enhance the security of taxpayer information and prevent future leaks.
Perhaps most importantly, the additional enforcement funding can help close to national tax gap- which totals $600 billion annually. This tax gap comes primarily from wealthy Americans who can afford to evade taxes or embroil the IRS in decades long legal battles the Service cannot afford to fight. Closing this gap creates a more equitable system for all Americans.
The IRS is the primary revenue source for the entire federal government. Without revenue from the IRS, it is impossible to fund any other federal agency or agency initiative. Put simply, we fund freedom. After a decade of decimating IRS capacity, Congress finally took action to improve IRS operations and rebuild its workforce. It will take some time, and no one should expect changes over night, but we are grateful for a momentary recognition that the IRS does vital work on behalf of the American people.
The column from Professional Managers Association (PMA) is part of the FEDforum, an initiative to unite voices across the federal community. The FEDforum is a space for federal employee groups to share their organizations’ initiatives and activities with the FEDmanager audience.
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