WASHINGTON: The Internal Revenue Service (IRS) said on Thursday that it plans to hire nearly 30,000 new employees and deploy new technology over the next two years as part of a $80 billion investment plan to improve tax enforcement and customer service.
In its long-awaited Strategic Operating Plan, the IRS stated that it will obligate approximately $8.64 billion of the new funding during the fiscal years 2023 and 2024, and that 8,782 of the new hires during those years will be enforcement staff.
US Deputy Treasury Secretary Wally Adeyemo told reporters that the IRS will hire more data scientists than they have ever hired for enforcement purposes, adding that these will complement more traditional tax attorneys and revenue agents in using new data analytics technology to identify audit targets. The IRS will also continue to hire 5,000 new taxpayer services employees in the coming months to answer phones, reopen taxpayer assistance centers, and process tax returns.
According to the 148-page plan, customer service hiring will total 13,883 full-time-equivalent employees over the next two years.
However, a significant portion of these new hires will replace the nearly 12,000 IRS employees who are expected to retire over the next two years, including more than 4,700 enforcement personnel, according to a US Treasury official.
After a decade of funding cuts, mostly by Republican-controlled Congresses, the $80 billion in new funding from last year’s climate-focused Inflation Reduction Act is aimed at rebuilding the agency’s audit capabilities and 1960s-era computer technology. It also aims to close the “tax gap,” which the Treasury estimates at $600 billion per year, by focusing new audits on the wealthiest Americans.
COMPLEX AUDITS
The IRS stated that $47.4 billion, or nearly 60% of the $79.4 billion in investments listed in the plan, would go towards increased enforcement of “taxpayers with complex tax filings and high-dollar noncompliance.”
These audit targets include wealthy individuals, corporations, and complex partnerships, all of which have increased in number while IRS audit staff has shrunk by nearly half in the last decade, according to new IRS Commissioner Danny Werfel.
Werfel stated that the agency would soon provide hiring and spending plans for the fiscal year 2025 and an ongoing update to the operating plan.
According to tax experts, recruiting tens of thousands of mid-career accountants, tax lawyers, and other staff capable of handling complex audits will be one of the IRS’s most difficult challenges.
The IRS will spend $12.4 billion on new technology and $4.3 billion on taxpayer services. By the end of fiscal 2024, early changes will allow taxpayers to respond online to dozens of tax notices.
REPUBLICAN BACKLASH
The plan drew new criticism from Republicans who want to eliminate IRS funding as part of their demands for raising the $31.4 trillion federal debt ceiling.
Werfel sought to debunk Republican claims that the funding will create an army of 87,000 armed agents to harass taxpayers. He stated that the percentage of Criminal Investigation staff would remain constant at around 3% of the IRS workforce.
Only about 2,100 Special Agents in the Criminal Investigation unit are authorized to carry firearms. The new IRS commissioner stated that he would enforce Treasury Secretary Janet
Yellen’s pledge not to raise historical audit rates for Americans earning less than $400,000, and would base this on “historically low” 2018 audit rates.
