President Biden has signed into law the new bill that, among other things, gives a large budget boost to the IRS.
The law gives almost $80 billion to the agency, which it is instructed to spend over the next ten years, in addition to its annual budgets. This amounts to an over 60% increase in the budget for the agency, assuming the annual budget numbers stay the same over that ten-year span.
It remains possible that a future Congress, particularly a Republican-dominated one, will slash the IRS budget to compensate for this extra spending. But if I had to guess, I’d guess that such a Congress would prefer to spend the extra money that a beefed-up IRS brings in while complaining about how the Democrats have unleashed the IRS, than to actually cut its budget. My expectation is that we’re stuck with a better-funded IRS for the near future.
The IRS recently released its Strategic Plan for . I assume that most of it is now obsolete, but it gives some idea of what the agency sees as its priorities. Treasury Secretary Yellen was anticipating the bill’s passage, and has fired off a memo instructing the agency to quickly (by bureaucratic standards) develop a new plan for spending the additional money.
The agency hopes to use some of the money to hire about 87,000 new employees. Since the agency currently has something like 83,000 employees, that sounds at first like a pretty big deal. But about 52,000 of the agency’s current employees will be eligible to retire within the next six years. So a lot of this new hiring will just be replacements. Also, I think that “87,000” number comes from a Treasury Department estimate published before inflation and a tight labor market combined to change salary expectations significantly. My guess is that the actual number of new hires will come in well below that number. (Republican hyperbole suggests that these 87,000 will be “an army of 87,000 armed IRS agents” doing enforcement and audits, but I see no reason to believe that is the case. Rather the hires will likely be in a variety of roles throughout the agency.)
The IRS has been tightening its belt for a decade or so now, so much so that it can barely function. There’s a boatload of deferred maintenance it will have to undergo just to get seaworthy. Onboarding new employees is a lengthy and cumbersome process for the agency. So I do not expect much rapid improvement in the agency’s abilities, particularly in enforcement. We’ll probably begin to soon see evidence that the capabilities collapse of the agency has slowed and halted (there may be somewhat quicker improvements in data entry and what they call “customer service”). it took the agency to process my tax return, for example, and I’d be surprised if it takes them any longer than that .
Treasury Secretary Yellen has vowed that none of the new spending will be used to increase audits on households making less than $400,000 per year — “relative to historical levels” anyway, which seems to me like it leaves enough wiggle room for a substantial increase, given how audits in all income levels have been falling in the recent “historical” epoch. (Hint for rich people: If you’re going to cheat on your taxes, make sure you cheat enough to get your declared income under $400,000!) But for many of us tax resisters, audits aren’t really the sort of enforcement we’re most concerned about anyway. In my case, for example, the IRS seems to have thrown in the towel, and has been letting my years of unpaid taxes expire due to the statute of limitations without taking any but the most half-hearted measures to collect. It may be that in a few years, when some of these new hires come up to speed, they’ll begin to take some of these cold cases like mine off the back burner and start trying to collect more earnestly.
I’ve been mostly concentrating on the IRS funding aspects of the new legislation, but there are a few other elements that may be of interest to those of us who use legal tax deductions and tax credits to lower or eliminate our income tax bills. The legislation extends the more-generous health insurance subsidies of the Affordable Care Act (Obamacare), which were otherwise scheduled to expire, and which are partially-implemented in the form of a tax credit. There are also new tax credits available to people who spend money on making their homes more energy-efficient or who purchase certain types of clean-fuel vehicles.
