Inflation Reduction Act: Fund the IRS
It isn’t often that I cut articles out of the newspaper anymore. In fact, just reading that sentence makes me want to check the closets for hidden VHS and cassette tapes and throw them out. That said, I cut out an op-ed by Kent Bush of the Rapid City Journal last week. It was a great commentary on the IRS funding provisions of the Inflation Reduction Act.
The numbers that seem to have struck a note with my friends are the 87,000 new IRS agents and $80 billion dollars in new funding. Thoughts about these numbers opens polite phone calls and friendly client chats. I’d like to tell you why these numbers should hopefully not make law-abiding taxpayers worried:
- The IRS has stated that the 87,000 number is primarily to keep up with IRS employee retirements and a greying workforce, and to provide more customer service employees. It is unclear how many incremental new agents will be hired, but the IRS has stated there won’t be a large influx of new auditors.
- Most citizens calculate their income appropriately and pay their fair share of taxes. These citizens should have no worries if they are audited. On the other hand, tax dodgers should never feel comfortable operating in a nefarious way no matter how thinly funded the IRS might be. Also, It is simply good business for the government to ensure that people who do not pay their fair share in taxes should have some chance of being audited.
The IRS has promised that this funding will not be used to increase audits on small businesses or individuals making less than $400,000 per year. Their focus will apparently be on wealthier taxpayers. We hope this promise is kept. We understand some people are skeptical of this promise.
Much of the funding will be used to simply improve the IRS’s terrible customer service:
- The IRS has stacks of unanswered mail and the paperwork deluge is burying the agency. A quick google search for “IRS cafeteria” will provide a visual.
- The IRS answers only between 10-20% of calls received. It can take multiple tries and hours on hold to reach an agent.
- The unanswered mail and phone calls compound on themselves to create greater problems. For example, if we have to paper file an amended return for 2020 for a taxpayer and the return does not get processed timely, it can cause huge issues with a timely 2021 filing. Picture a wreck that occurs in the first lap of a NASCAR race and the next lap starts without clearing the track. The wreck compounds itself.
If due to the Inflation Reduction Act, the IRS gets a boost in funding, the everyday taxpayer should not necessarily worry about IRS Agents knocking down their doors. If the funding leads to availability of agents for phone call, or to open and reply to mail in a timely manner, your accountant will be happy and you should be too.