The Mercury News Weekend
IRS unveils $80B plan to overhaul tax collection
The IRS on Thursday unveiled an $80 billion plan to transform itself into a “digital first” tax collector focused on customer service, laying the groundwork for an ambitious overhaul of one of the most scrutinized arms of the federal government.
The long-awaited road map is a centerpiece of President Joe Biden's economic agenda, which aims to narrow the nation's $7 trillion of uncollected tax revenue and use the funds to combat climate change, curb prescription drug prices and pay for other initiatives prized by Democrats.
The infusion of funds into the IRS was included in the Inflation Reduction Act, the sweeping climate and energy legislation that Democrats pushed through last year. Efforts to bolster the agency have drawn strong opposition from Republicans, who have long accused the IRS of improperly targeting them.
The report, which was requested by Treasury Secretary Janet Yellen, offers new details about how the IRS intends to use the additional funding over the next decade. The Biden administration has been focused on highlighting improved taxpayer service and responsiveness, but the report indicates that more than half the money will be dedicated to cracking down on big companies and wealthy individuals that evade taxes.
In a memorandum to Yellen that accompanied the report, Daniel Werfel, the new IRS commissioner, said he would focus new enforcement resources on “hiring the accountants, attorneys, and data scientists needed to pursue high-income and high-wealth individuals, complex partnerships and large corporations that are not paying the taxes they owe.”
The IRS has about 80,000 full-time employees, which is about 20% fewer than it had in 2010 despite a larger U.S. population and a more complex tax system. The agency's resources have also declined over the years, as Republicans have sought to cut its funding and, in some cases, have called for its abolition. The financial strain has led to backlogs of tax filings, delayed refunds and long waits for taxpayers who call the agency with questions.
In recent months, the IRS has ramped up hiring to improve its “customer service” capacity and has been racing to complete the processing of old tax returns, most of which were filed on paper rather than electronically.
Thursday's plan details how the IRS intends to become a “digital first” organization that provides “world class” service to taxpayers. That includes the replacement of antiquated technology and the introduction of systems that will allow taxpayers greater access to their financial information, easier communication with the IRS and new ways to correct errors as returns are being filed.