Details about the Internal Revenue Service’s spending plans for a major cash influx are about to come to light, Treasury Secretary Janet Yellen said Tuesday.
More than half a year after Congress authorized $80 billion in new funding for the tax-collection agency over the next decade, Yellen said details are coming this week on how the IRS will put the money to use in improving customer service, upgrading internal technology and making sure the richest taxpayers are paying their fair share.
The $80 billion infusion is part of the Inflation Reduction Act, which passed Congress last summer without Republican support and plenty of GOP skepticism that the additional funding would be used appropriately, depicting it instead as engendering a sort of tax-collection police state in which middle-income individuals could find themselves targeted by armed IRS agents.
From the archives (August 2022): Fact check: No, the IRS is not hiring an 87,000-strong military force with funds from the Inflation Reduction Act
Yellen spoke Tuesday at the swearing-in ceremony for Danny Werfel, the newly confirmed IRS commissioner. Werfel “will lead the IRS through an important transition” after a period during which the agency “suffered from chronic underinvestment,” Yellen said in prepared remarks.
During Werfel’s confirmation hearing in February, senators from both parties pressed him about how he would oversee the new money’s use.
The U. S. House of Representatives is under Republican control, and observers expect lawmakers to give hard looks at the funding of the IRS. The House, in fact, voted in January to repeal the $80 billion. The measure isn’t expected to go further, with Democrats retaining control in the Senate and President Joe Biden, a Democrat, in the White House.
Some of the money will go toward modernizing the taxation experience. Within the first five years of the decade-long plan, taxpayers should be able to file all of their tax documents and respond to all IRS notices online, according to a Treasury official.
There are a handful of IRS notices for which taxpayers currently have that capacity. By the end of fiscal 2024, another 72 notices, which include Spanish-language notices, will add online capacity, the official said.
By the end of fiscal 2025, taxpayers, along with accountants and other professional tax preparers, should be able to peruse their accounts and view and download information, including payments and notices, the official said.
The IRS has already been hiring more staff, including 5,000 customer-service representatives to improve phone service, which has fallen off during the pandemic.
Tax Day is weeks away, on April 18. As of late March, income-tax refunds are 11% lower than they were last year. They are averaging $2,903 versus $3,263 at the same point last year. It’s an outcome many tax-code watchers predicted after pandemic-era boosts to certain tax credits went away.
The same day Yellen spoke, a new watchdog report said the IRS still has plenty of work to do processing the backlog of tax returns that built up during the pandemic.
During last year’s tax-filing season, the IRS hired 9,000 employees and shifted more than 2,400 workers from other areas to cut the backlog, according to Treasury’s inspector general for tax administration.
By last July the IRS had transcribed all tax-year 2020 paper returns but still had 9.5 million unprocessed 2021 paper returns. “The inability to timely process tax returns and address tax account work continues to have a significant impact on the associated taxpayers,” the report said.
At this point, the IRS says it has processed all paper and electronically filed returns that it received before this January. The agency said it still has 2.17 million unprocessed tax returns from the 2022 tax year and 2021 returns that needed fixes and corrections.