Yellen: $80bn increase in IRS funding will make ‘real difference’ for taxpayers
Minister of Finance Janet Yellen on Thursday detailed some of the Biden administration’s plans for the Internal Revenue Service as part of an $80 billion increase in funding, including expanding personal services.
Speaking at the IRS facility in New Carrollton, Maryland, Yellen said the funding will help improve the IRS in the form of better technology and services for taxpayers, as well as stricter enforcement targeted at wealthy Americans and corporations.
“The Inflation Reduction Act finally provides funding to transform the IRS into a 21st century agency,” Yellen said. “While all improvements won’t be made overnight, taxpayers can expect real changes during next filing season.”
The funding was included in a Democrat bill on health care spending and climate change, dubbed the Inflation Reduction Act, that Biden signed into law last month.
Yellen said the money would be used to expand services in IRS Tax Assistance Centers and it is predicted that these centers will be able to help approximately 2.7 million Americans in the upcoming application season, compared to approximately 900,000 currently.
In addition, she said the IRS will hire about 5,000 customer service representatives to improve the IRS response service. (Currently, the IRS has only been able to answer about 2 out of 10 phone calls.)
Keeping the IRS flowing in funding was a top priority for Democrats and became one of the most prominent financiers of the $739 billion bill. But it has sparked a fierce outcry from Republicans, who say the strengthening of the IRS could end up harming low-income Americans.
This is because the IRS disproportionately targets low-income Americans when it conducts annual tax audits. In fact, households making less than $25,000 a year are five times more likely to be audited by the agency than everyone else, according to a recent study. tax data analysis as of fiscal year 2021 by the Transactional Record Access Clearinghouse (TRAC) at Syracuse University.
The reason for this is the rise in so-called “correspondence checks,” which means that the IRS conducts tax return checks via letters or phone calls, rather than more complex in-person checks. Only a small fraction – 100,000 of 659,000 checks in 2021 – were carried out in person.
According to a study in Syracuse, more than half of the absentee reviews initiated by the IRS last year — 54% — involved low-income workers with gross receipts of less than $25,000 who claimed an earned income tax credit as an anti-poverty measure. .
The discrepancy is primarily due to the fact that high income taxpayers have complex investments that can easily hide gaps between taxes due and paid and taxes reported and paid.
Yellen spoke out against that fear, reiterating Thursday that she ordered the IRS not to increase screening of households earning less than $400,000 a year.
“Importantly, I directed that enforcement resources not be used to increase audit rates for households earning less than $400,000 a year from historical levels,” she said. “In fact, we expect audits for honest taxpayers to drop once the IRS has the right technology infrastructure in place. This means an easier tax filing period for taxpayers who do everything right.”
The proceeds generated from the policy will go towards initiatives aimed at fight against climate change and containment of pharmaceutical prices, as well as efforts to reduce the $30 trillion national debt. It includes about $433 billion in new spending, while roughly $300 billion in new revenue will go towards paying off the country’s deficit.
Credit: www.foxbusiness.com /