It’s been one year since a law earmarked a massive cash infusion for the Internal Revenue Service, and the tax agency says it’s making a return on the investment.
Now it has to sell that idea as the congressional budget process grinds on.
Wednesday marks one year since President Joe Biden signed the Inflation Reduction Act into law. Among other things, the climate and tax package earmarked $80 billion in extra funding to the IRS over a decade. The money was intended to rebuild staffing, upgrade technology and enact more enforcement against wealthy households and corporations.
However, in the negotiations to lift the debt ceiling between the White House and House Speaker Kevin McCarthy earlier this year, both sides agreed to immediately pull back $1.4 billion in IRS funding and redirect $20 billion of that $80 billion to other domestic spending.
Still, the tax agency can already point to improved phone service and improved abilities to interact with the IRS online instead of through paper, thanks to the infusion of funds, IRS Commissioner Danny Werfel said Wednesday.
Phone operators were able to assist 3 million more people this year compared to last year, cut phone wait times to 3 minutes from 28 minutes, and served 140,000 more taxpayers in-person. The IRS is expanding its capacity to call back customers instead of placing them on hold. Soon, taxpayers will be able to respond to 51 types of notices and letters online, up from 10 notices earlier this year.
The agency is also starting to show results from more tax enforcement for high-end tax cheats, he said. Last month, the IRS said it collected $38 million in back taxes from recently-closed cases against households worth at least a million dollars.
“The success of the past 12 months is just a start. That’s because the IRS has a lot of catching up to do,” Werfel told reporters.
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The agency is “approaching” a headcount of 90,000 full-time workers in its ranks, but specific numbers weren’t immediately available, Werfel noted. Still, it’s been more than a decade since the agency had 90,000 full-time workers, he said. The recent hiring spree included 5,000 phone assistants.
The Inflation Reduction Act passed last year along party lines, when Democrats controlled the House of Representatives and the Senate. But Republicans have long been wary of the extra money for the IRS.
In the ongoing fight over the upcoming budget, a House appropriations bill allows $11.2 billion for the IRS, which would be $1 billion less than the enacted levels for this year. The point is to rein in “wasteful spending,” according to an explainer on the committee-approved bill.
A full view of House Republican proposals would ultimately take back $67 billion, according to researchers at the left-leaning Center on Budget and Policy Priorities.
Werfel said the IRS can certainly get results with $60 billion instead of $80 billion, but if the IRS base budget gets reduced year over year, the agency will have to use Inflation Reduction Act money for everyday operations.
“If we spend our capital budget to pay for our operating budget, then a few years from now, we will have done our day-to-day job, but exhausted resources intended to make the types of improvement taxpayers need,” Werfel said.