new funding will help the Internal Revenue Service crack down on rich tax cheats while greatly improving services for middle-class households, IRS Commissioner Danny Werfel said Monday.
Werfel said it’s too soon to say the IRS will hire 87,000 employees who have been part of Republican talk about the government’s “weaponizing” of everyday Americans.
However, the new money will help the IRS “move to a world-class customer service operation,” Werfel told reporters, stressing that small business owners, workers with regular wage income and retirees are not afraid of increased tax enforcement targeting higher earners.
“People who get W-2 or Social Security payments or own small businesses don’t have to worry about some new wave of IRS audits — we’re taking that off the table,” Werfel said. “Our focus will be on other high-dollar areas for some time, as there is a lot of work to be done in more complex areas of tax law that will take years to complete.”
The agency’s $80 billion funding increase – a 69% increase over the previously projected budget – is a key part of the Inflation Reduction Act, a partisan bill Democrats passed last year using a special budget process that allowed them to sidestep Republican objections. The Congressional Budget Office says the money will help the IRS collect $200 billion more, meaning the investment will pay for itself and also reduce the cost of the legislation.
Republicans have been arrested in a 2021 Finance Department Report which estimates the extra funding will cover nearly 87,000 new IRS employees, suggesting that the increased IRS audits are part of Joe Biden’s plan to harass supporters of former president Donald Trump.
“The weaponization and politicization of federal agencies is appalling and terrifying. These are Gestapo-like tactics,” Rep. Jeff Duncan (RS.C.) said after the FBI searched Trump’s home in August for classified government documents. “If the FBI can do this to President Trump, what do you think 87,000 new IRS agents will do for the American people?”
Of course the 87,000 IRS employees are so important to Republicans that the first bill voted on after taking control of the House of Representatives this year is to defund the agency. The measure has no chance of passing the Senate or being signed by President Biden.
Biden said he would not support a tax increase on households earning less than $400,000, and his administration said increased IRS funding would not increase audits for those households — a promise Werfel repeated on Thursday.
“The IRS has no plans to increase the current audit rate for households making less than 400,000,” Werfel said.
But official will not say just how many people the IRS intends to hire overall, suggesting figures can change based on improvements to customer service, such as new online tools that can help people remove problems with returns faster than before.
“We don’t want to be locked in numbers on a piece of paper because we want to see the benefits that we get from technology, and how we can build a flexible workforce that will help us meet the needs of the American people. and also help us generate profits,” said the Deputy Secretary Treasury Wally Adeyemo in response to questions from journalists.
Werfel said the IRS staff has declined from 95,000 employees in 2010 to 80,000 last year, due to funding cuts from Capitol Hill. Meanwhile, the number of Americans making more than $10 million a year, and the number of tax filings from complex business entities, is growing.
When the IRS suspects that a tax filer is not paying what is owed, such as by not reporting income, the agency conducts a thorough investigation, usually by sending an audit letter. The IRS sends a disproportionate number of these letters to low-income applicants claiming tax credits, often asking them to catch up on income.
Audit rates for large companies, meanwhile, dropped from 10.5% in 2011 to 1.7% in 2019, according to IRS data. Werfel said budget constraints have reduced the number of auditors looking at complex cases from more than 5,000 a decade ago to just 2,600 today, and the new law will help hire the accountants, lawyers, economists and data scientists needed for those cases.
“This agency focuses on assessing tax compliance with high income and high wealth individuals, complex partnerships, large companies,” Werfel said. “The IRS has no plans to increase the current audit rate for households making less than $400,000.”
CORRECTION: An earlier version incorrectly attributed comments by Wally Adeyemo to Danny Werfel.