There has been quite a bit of confusion regarding both the context and likely results of the IRS’ recent monetary windfall. On August 16, 2022 President Biden signed into law the Inflation Reduction Act of 2022 which is designed to curb inflation by reducing the deficit, lower prescription drug prices, and invest into domestic energy production while promoting clean energy..
One item that received much attention is the $79.6 billion in increased funding for the IRS over the next decade. More than half, about $46 billion, has been earmarked to help the agency beef up enforcement.
Background
More than a year ago, in May 2021, the Treasury Department released the results of a study which reported that nearly 87,000 new employees could be hired over the next decade with $72.5 billion in increased funding, which was what the Biden administration called for in the American Families Plan Act, which morphed into the Inflation Reduction Act.
Who Will be Hired with All that Extra Money?
Based on the latest estimates and figures from credible sources, more than 20,000 positions out of the 87,000 “new” positions will simply consist of filling already-vacant job openings. Around 50,000 of the 87,000 positions will actually be considered truly new positions.
Another key point is that 87,000 new IRS employees does not mean that the IRS is going to add 87,000 new revenue agents by 2031. A sizable percentage of the new hires will consist of revenue agents, revenue officers, and other IRS employees we often think of when we hear the words “tax enforcement.” But many other new hires will likely work in IT and customer service – two areas in which the IRS is severely lacking.
What’s the Purpose of the Increased IRS Funding?
The primary goal of the fresh $79.6 billion for the IRS is to close what’s known as the tax gap. The tax gap is the difference between what all taxpayers truly owe to the federal government under existing laws and what the IRS actually collects from taxpayers. In that way, proponents of the Inflation Reduction Act argue that the federal government will actually see a positive ROI from the IRS funding.
With this effort to reduce the tax gap, many taxpayers are, understandably, worried about the increased likelihood of IRS collection and the dreaded IRS audit. The Biden administration and many tax experts have asserted, and continue to assert, that the IRS will focus on high-income taxpayers and largely keep the status quo for individuals making less than $400,000 per year. Taxpayers making more than $400,000 per year often have income that is not reported on W-2 tax forms.
However, because our firm cannot guarantee that collections and audits will not significantly increase on taxpayers of all brackets, we urge you to come to us if you have outstanding issues with the IRS. It is almost always better to make the first contact with the IRS in these situations as opposed to letting the agency discover non-compliance on its own.Our firm pledges to work with you to resolve your tax conflict and achieve peace of mind in the most efficient way possible. For more information on the $79.6 billion in increased funding, check out our recent video. If you’re ready to speak directly with us about resolving your tax dispute, contact us here today.
The post The IRS is NOT adding 87,000 new ‘armed’ agents. Here’s what’s really going to happen appeared first on IRS Seattle Tax Law Firm.