Reconciliation bill includes nearly $80 billion for IRS including enforcement, audits: What that means for taxpayers

Senate Democrats passed Sunday’s climate, tax, and health package. This included nearly $80 billion for funding the IRS.

President Joe Biden has included the Inflation Reduction Act as part of his agenda. It allocates $79.6 Billion to the agency over the next 10 year. The IRS intends to collect more money from tax dodgers of high-net-worth corporations and corporates, with more than half of the money going towards enforcement.

The remaining funding is used for operations, taxpayer services and technology. It also supports the development of an e-file system that is free of charge. Together, these improvements are According to estimates, $203.7 billion in revenue is expected between 2022 and 2031. recent estimatesThe Congressional Budget Office.

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According to a report by a, IRS audits have declined in the past decade. The biggest drop was among the wealthy. May 2022 reportThe Government Accountability Office.

The report found that the audit rate for Americans who earn $5 million or less dropped to 2% in 2019, from 16% in 2010. The agency stated that they are working to improve these numbers.

Garrett Watson, senior policy analyst at Tax Foundation, said that the Inflation Reduction Act will need to be approved by the House. Once it is signed into law, however, it will take time for the IRS funding to be phased in. The Congressional Budget Office estimates only $3 billion of $203.7 billion in revenue for 2023.

He said, “We didn’t get here overnight with the agency, and it will take longer than that to get in the right track.”

IRS: We won’t increase audit scrutiny on the middle class

Advocates applaud the increased IRS budget. However, opponents argue that the increased enforcement may affect more wealthy Americans, violating Biden’s $400,000 pledge.  

“My colleagues claim that this massive funding boost will enable the IRS to pursue millionaires, billionaires, and so-called rich tax cheats,” but the truth is that a substantial portion of the IRS funding bloat revenue would come from taxpayers whose income is below $400,000,” Sen. Mike Crapo R-Idaho, ranking Member of the Senate Finance Committee said in a statement.  

Charles Rettig, IRS Commissioner, stated that the $80 billion in funding would not cause an increase in audits for households earning less than $400,000 annually.

“The resources in the reconciliation package will get us back to historical norms in areas of challenge for the agency — large corporate and global high-net-worth taxpayers,” he wrote in a letter to the Senate.

He said, “These resources are not about increasing audit scrutiny of small businesses or middle-income Americans.”

According to a survey, more than two-thirds support increasing the IRS budget to improve tax enforcement for high-income taxpayers. 2021 pollFrom the University of Maryland   

Source: CNBC

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