What do we get with new IRS funding? A crackdown on corporate jet abuse.
More audits of corporate jets, better service for normal taxpayers. That’s the good-news story the Internal Revenue Service has to tell about how funding the agency benefits the country.
For years, the IRS had been starved of resources, making do with comically ancient IT, terrible customer service and a shrunken enforcement team, which sometimes allowed brazen tax fraud to run rampant. Then, in 2022, President Biden and congressional Democrats decided to remedy these problems through an $80 billion investment in the agency.
Republican lawmakers have been trying to claw that money back ever since. Defunding the tax police was the GOP’S first order of business when it reclaimed control of the House last year, and it has been a key demand in multiple high-profile legislative showdowns since, including in the debt-limit deal and one of the (failed) Israel aid bills. Meanwhile, right-wing commentators have frightened voters into believing that the $80 billion is being used to hire an army of 87,000 gun-toting IRS agents to bust down the doors of law-abiding, middle-class taxpayers.
You know, Americans just like you.
It’s all nonsense. If you want to know what the IRS has actually been doing with this money, consider a couple of examples from this past week.
On Wednesday, the IRS announced a new program to audit companies for the use (and abuse) of corporate jets. Some companies have improperly treated flights used for executives’ personal vacations as deductible business expenses — which they are not — to dodge tax responsibilities.
“This is one of many areas that has not been closely scrutinized during the past decade as agency resources shrank,” said IRS Commissioner Daniel Werfel, who added that these audits will prevent tax-shirking from, ahem, “flying under the radar.”
The corporate jet enforcement program will start with just a few dozen audits, but it’s part of a broader IRS effort to ensure large corporations, complex partnerships and high-income individuals pay what they legally owe. At the very least, the IRS aims to return audit rates of these groups to their historical levels after many years of decline. Anemic tax enforcement of the wealthy and large corporations has contributed to the federal government’s funding shortfall as well as perceptions that some taxpayers don’t pay their “fair share.”
So why is it useful to highlight the corporate aircraft effort, among these broader endeavors? Well, execs who take private jets have little chance of being confused with regular, middle-class Americans — i.e., the “little people” taught to fear the apocryphal army of IRS agents.
Meanwhile, the agency is also investing in more advanced data-science capabilities to improve decisions about whom to target for audits in the first place, Werfel said during a call with reporters. The idea is to avoid pulling compliant taxpayers (however much they earn) into the agency’s auditing dragnet.
This is an issue I have harped on before: Law-abiding Americans might reasonably worry that additional IRS resources could be deployed against them because IRS audits too often conclude that an audited taxpayer doesn’t actually owe any more money. These “no-change” audits are wasteful for the agency and stressful and expensive for those who endure them.
Also this week, the IRS expanded its “Direct File” pilot program, which lets Americans file their 2023 federal tax return online for free directly with the IRS, rather than through a third party such as Turbotax. The tax prep industry (and Republicans) have fought efforts for such a program for years, but the 2022 law finally got it off the ground.
For now, the IRS’S Direct File pilot is very limited. As of Thursday, it became available to the public in only 12 states for brief windows of time while the agency tests handling heavier volume. It has a live-human chat function, but it can only process simple tax returns (for example, no gig-economy income, no health-premium tax credits).
Still, it’s a step in the right direction and exactly the kind of pro-taxpayer thing the agency should be advertising.
In fact, when I was shown a Direct File demo last month, I was struck by how frequently the software notified taxpayers that they might be leaving money on the table (in tax credits or deductions) because of the software’s current limitations. When I asked about this, IRS officials told me that an accurate return is not one that forces taxpayers to pay the highest possible amount, but one which in taxpayers receive everything to which they’re legally entitled.
This was a refreshing, service-oriented approach to the role of the nation’s top revenue collection agency — and so different from the punitive image often projected by both the IRS’S boosters and critics. It’s a message the IRS should shout from the rooftops: tougher on tax cheats, and more helpful for the rest of us.