[ad_1]
WASHINGTON—The Internal Revenue Service unveiled its strategic plan Thursday for revamping the agency amid Republican opposition, promising to shift more taxpayer interactions onto digital platforms and add thousands of new enforcement staffers to audit wealthy people and corporations.
The plan starts spelling out how the tax agency will use $80 billion Congress provided last year. It outlines a renewed IRS focus on enabling smoother taxpayer engagement with the agency, eventually including real-time alerts of problems with returns and clearer information about the status of refunds or audits.
The beefed-up audits, a point of contention with Republicans, will initially be exclusively focused on high-earning households and large partnerships and companies, said
Danny Werfel,
the agency’s commissioner. The plan calls for hiring more than 7,000 new enforcement employees in the next two years.
“The IRS has no plans to increase the most-current audit rate we have for households making less than $400,000,” Mr. Werfel said Thursday. The administration had previously said that audit rates for those households wouldn’t exceed historic levels, but officials hadn’t been more specific. Audit rates in recent years have been lower than in decades past.
“We will not come close to hitting or exceeding any historic average rate,” Mr. Werfel said.
The IRS has struggled for the past decade with flat or declining budgets, depleting its corps of auditors, slowing tax-return processing and causing long wait times on toll-free telephone lines. That led Congress to give the IRS $80 billion to spend through fiscal year 2031 as part of last year’s climate and health law known as the Inflation Reduction Act. Most of the money is earmarked for enforcement.
Republicans, who didn’t support the law, won control of the House last year after campaigning on criticisms of the IRS and claims that it would use the money to go after American families and small businesses. They voted to claw back much of the $80 billion shortly after the start of the new Congress. That bill isn’t expected to pass the Democratic-led Senate.
“The last thing Montanans want or deserve is more government in their lives,” said Sen.
Steve Daines
(R., Mont.), a Finance Committee member. “It’s clear that this is big government at its worst, and I hope to see all of my colleagues oppose this wasteful use of taxpayer dollars.”
The plan doesn’t provide a detailed spending breakdown of the $80 billion over the next decade. And unlike a 2021 Treasury Department plan that projected 87,000 new hires, the latest version doesn’t include a staffing forecast beyond fiscal year 2024. The agency says it will update the plan annually and adjust hiring plans based on its progress.
IRS Commissioner Danny Werfel said the agency’s auditors would be focused on unraveling complex transactions by large partnerships and corporations.
Photo:
Bonnie Cash/Getty Images
“We don’t want to be locked into numbers on a piece of paper,” said Deputy Treasury Secretary
Wally Adeyemo.
The IRS promises in the strategic plan to create what it calls a “world-class customer service operation” where taxpayers can interact with the government digitally if they choose.
In the short run, the IRS has been hiring thousands of people to staff telephone lines and process paper tax returns and notices. That has yielded improvements to customer service, data show.
The digital transformation the IRS promises would take longer and won’t fully replace telephone and in-person support. Once more information can enter IRS systems without being typed digit-by-digit and once taxpayers can get more information about their payments, liabilities and issues through online accounts, the IRS expects to shift employees to work that requires more individualized attention.
The plan spells out a few benchmarks for those improvements, though major data upgrades are challenging, and the agency’s information-technology projects have a mixed record. By July, it expects to have a customer-callback option for 95% of taxpayers. By next year’s tax-filing season, the IRS says it will have better status-tracking tools. It is also letting taxpayers respond to more notices online.
IRS personnel by budget activity, change from a year earlier
Prefiling
taxpayer assistance
and education
Filing and
account services
Examinations
and collections
Shared services
and support
IRS personnel by budget activity, change from a year earlier
Prefiling
taxpayer assistance
and education
Filing and
account services
Examinations
and collections
Shared services
and support
IRS personnel by budget activity, change from a year earlier
Prefiling
taxpayer assistance
and education
Filing and
account services
Examinations
and collections
Shared services
and support
IRS personnel by budget activity, change from a year earlier
Prefiling
taxpayer
assistance
and education
Filing and
account services
Examinations
and collections
Shared services
and support
IRS personnel by budget activity, change from a year earlier
Filing and
account services
Prefiling
taxpayer assistance
and education
Examinations
and collections
Shared services
and support
“With any IT project, you can’t take five to 10 years to build something and then review it in one day,” Mr. Adeyemo said. “You’ve got to be iterative, and you’ve got to have products that you’re releasing over time. And that’s how the plan was built.”
As required by last year’s law, the IRS is also studying whether it should build a system so taxpayers could file their returns directly with the government. That would be a fee-free competitor to TurboTax and other software programs; that IRS study is due later this spring.
Increasing enforcement will take even longer. New employees must be hired and trained, which typically requires taking experienced auditors off their regular duties to teach the new staff.
The enforcement spending will yield $180 billion in additional revenue over the decade, according to a Congressional Budget Office estimate. Treasury officials say that figure is low, arguing that better taxpayer service and improved use of data will improve voluntary compliance.
At his swearing-in ceremony this week, Mr. Werfel said the agency’s auditors would be armed with calculators and would be focused on unraveling complex transactions by large partnerships and corporations. Republicans had warned on the campaign trail about armed IRS agents potentially harassing businesses. (The IRS has a criminal-investigation division where agents can carry weapons.)
Erin Collins,
the national taxpayer advocate, wrote in a blog post Thursday that Congress should reallocate some of the enforcement money to taxpayer services and IT. Ms. Collins, who runs an independent office within the IRS, said she supports the plan’s long-term goals and sees the potential for an improved taxpayer experience; she also urged the agency to continue prioritizing reducing backlogs in return processing.
Members of Congress have been pressing the IRS and Treasury Department for the plan, which was due in mid-February. They are likely to push Mr. Werfel for more detail in the months ahead.
SHARE YOUR THOUGHTS
Do you think the changes included in the IRS spending plan will improve your experience with the agency? Join the conversation below.
Whether the IRS can carry out its vision rests partly in Congress’s hands. The $80 billion plan assumes the IRS will get steady annual appropriations from Congress to cover existing operations, so the new money can be used for expanding and changing the agency.
Without that regular funding, plus increases for inflation and pay raises, some taxpayer-service improvements will last just four years, according to the plan. The agency would begin using some of the money from the IRA to backfill basic operations instead of expansion.
“Diverting IRA funding to cover base discretionary enforcement needs would lead to more noncompliance, leading to decreased revenue collection and increased deficits,” Mr. Werfel wrote in the report.
The administration is seeking $14.1 billion for the IRS’s base budget in fiscal year 2024, a 15% increase from 2023. Republicans have already balked at that request, and it is likely to be a point of conflict in fiscal negotiations this year.
Write to Richard Rubin at richard.rubin@wsj.com
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
[ad_2]