BEYOND THE NUMBERS
Tax Day Highlights IRS Progress and Need to Protect and Replenish Funding
Tax filers are benefiting this tax season from recent improvements to the IRS’ customer service and technology made possible through the supplementary funding provided in the Inflation Reduction Act (IRA). After more than a decade of steep budget cuts that imperiled the agency’s ability to adequately serve taxpayers and enforce the nation’s tax laws, the IRA funding has helped the agency process returns more quickly, answer more filer questions, and ensure high-income people pay more of the taxes they legally owe. Honest taxpayers deserve a modern, functional IRS, which requires a full congressional commitment to the rebuilding effort — including protecting IRS base funding provided through annual appropriations.
Before the IRA-enabled improvements, the IRS budget fell by roughly 20 percent (after accounting for inflation) from 2011 to 2020. As many as 9 in 10 taxpayer phone calls went unanswered, while audits plummeted for millionaires (see chart) and corporations, contributing to the $625 billion annual net tax gap.
Since the IRA, the agency has begun implementing its ten-year strategic operating plan to transform how taxpayers interact with the IRS, modernize outdated technology and ensure responsiveness to taxpayer needs, and increase compliance of high-income households and businesses with complex returns, which today are rarely audited.
A few highlights of the IRS’ recent successes, which are making tangible improvements to tax filers’ experience this tax season:
- Better taxpayer assistance. The IRS has expanded the number of filers receiving filing assistance, including through the opening or reopening of Taxpayer Assistance Centers, many of which now offer extended hours including Saturday appointments, serving 235,000 more tax filers in person in filing season 2023 compared to 2022. The agency has also vastly improved phone service by reducing average wait times to five minutes or less and improved its call back function that will we available to 95 percent of callers during high-volume call periods.
- Technology upgrades. The IRS has improved visitors’ ability to access and find information on its website, expanded paperless processing for e-filing of forms and correspondence, and upgraded IRS Online Account features that make it easier for filers, including small businesses, to communicate with the IRS and receive information about their returns.
- Direct File pilot program. The IRS has implemented a pilot program for this tax season that offers eligible taxpayers in 12 states a no-cost option to file their federal tax returns online directly through the IRS, instead of through a private tax preparer.
There’s more to be done, however, to ensure a well-functioning IRS and tax system for the long term. The agency’s strategic plan outlines investments that will transform its technology and customer service and will better detect tax cheating through targeted data analytics.
These new initiatives will require funding certainty as the IRS seeks to hire and train more compliance and customer service staff and to make time- and resource-intensive technology upgrades. But in the past year, House Republicans have repeatedly tried to gut the agency’s IRA funding, and fiscal year 2024 appropriations rescinded $20 billion of the $80 billion provided in the IRA, carrying out the terms of the debt-limit agreement as renegotiated earlier this year. These cuts will result in a steep funding cliff toward the end of the decade.
Policymakers should ensure continued progress in rebuilding the IRS by rejecting efforts to further cut IRS funding. Moreover, the expiration of the 2017 tax law’s individual income and estate tax cuts in 2025 is expected to spur legislative action. Congress should use that opportunity to restore the $20 billion that was cut and create a permanent, mandatory funding stream to ensure the IRS can continue to rebuild and provide the tax service filers deserve.
