The Mercury News Weekend

IRS unveils $80B plan to overhaul tax collection

- By Alan Rappeport

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.

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