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IRS to Spend Only 4% of Allocated Funds on Service Despite Promises

The Internal Revenue Service (IRS) will use just $3.2 billion, or 4 percent of the $80 billion windfall from the Inflation Reduction Act signed by President Joe Biden, to improve taxpayer service, according to recent reports. 

The latest development appears to conflict directly against the announcement by Treasury Department officials who vowed that Americans should expect a “significantly higher level of service in the next filing season.”

According to reports, the small amount of funds the IRS will use from the Inflation Reduction Act to improve taxpayer service contrasts with the $46 billion or 58 percent devoted to enhancing what some describe as “monitoring and compliance.” While the Treasury Department and White House officials have defended such actions, economists and tax-focused groups like the National Taxpayers Union Foundation and others are not convinced of the agency’s promises. 

The promise by the Treasury Department and the IRS comes as the President and Democrat lawmakers in Congress face backlash over the Inflation Reduction Act, with many worried that the government agency will target small and middle-class families and businesses to raise revenue. Many experts familiar with the functioning of the IRS believe that the 4 percent appropriated to help taxpayers with complicated tax code is unlikely to help with the massive increase in audits. Additionally, analysts from the nonpartisan Congressional Budget Office (CBO) estimate that individuals earning less than $400,000 will pay an estimated $20 billion more in taxes over the next decade, resulting from the Democrat Party’s push for a $740 billion package. From that $740 billion package, the IRS will allocate $80 billion to hire 87,000 agents to conduct the agency’s tasks.

Small and middle-class businesses and families will be hit the hardest, given specific measures to improve the agency’s collection of under-reported income. The President and his administration have dismissed critics of the bill, arguing that estimates do not account for how much the bill will offset costs for average Americans like prescription drugs. Treasury Secretary Janet Yellen acknowledged that the new and improved IRS could ramp up collections from ordinary middle-class taxpayers, directing the IRS to use additional resources for not increasing the share of small businesses or households making below the $400,000 bracket.

In response to the Treasury Secretary’s statements, economists and tax-related experts argued that Yellen should fix the system before adding any more enforcement to an agency known for its slowness and ineffectiveness. Some have argued that the agency could purchase $1 million of the $56 million lost in bank interest through unopened checks, allowing the agency to recoup millions. Additionally, experts like Bishop-Henchman over at the National Taxpayers Unions argue that if the agency granted individuals the option to digitally file forms, it would save millions of dollars and eliminate around 40 percent of human error when manually entering paper forms.

When President Biden signed the Inflation Reduction Act, Republican lawmakers and economists warned that the bill did not reduce inflation but provided funds to government programs and agencies to support Democratic policy objectives. With many Americans lacking faith in the federal government to fix anything, some believe that the recent measure to provide the IRS with added resources and agents will make many Americans fearful of being audited and that economic conditions in the country will continue to worsen. As the IRS takes advantage of its new billion-dollar funds to boost itself, many Americans are now facing anxiety over the thought of making a mistake with their taxes.

Most economists and experts believe that instead of finding ways to improve itself, the agency will continue to revert to hounding taxpayers with increased staff and resources.

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