On Thursday, the IRS revealed its plan for using the nearly $80 billion in agency funding authorized through the Inflation Reduction Act in August, focusing on improving customer service, technology, and enforcement efforts.
"Now that we have long-term funding, the IRS has an opportunity to transform our operations and provide the service that people deserve," said IRS Commissioner Danny Werfel during a press call.
In line with Treasury Secretary Janet Yellen's priorities, the plan aims to enhance various aspects of taxpayer service, such as digitizing the filing process within five years and enabling taxpayers to respond to all IRS notices online.
The IRS has already begun utilizing part of the funds designated for customer service, hiring 5,000 phone assistants before the 2023 filing season. Since February, taxpayers have been able to reply to specific IRS notices online. Werfel reported that the agency is now answering 80-90% of calls, compared to just 17% in fiscal year 2022. The average phone wait time has also been reduced to four minutes, compared to 27 minutes at this time last year. "This additional staffing made an immediate difference," Werfel said.
The plan also seeks to modernize outdated technology, with IRS tools helping taxpayers identify errors before filing returns and upgrades potentially resolving errors more rapidly. Mark Everson, a former IRS commissioner and current vice chairman at Alliantgroup, noted that this approach marks a departure from the organization's traditional methods and acknowledges the challenges faced during the pandemic.
Deputy Treasury Secretary Wally Adeyemo stated that the agency aims to eliminate its paper backlog in five years by transitioning to a "fully digital correspondence process."
To reduce the budget deficit, the IRS plans to close the tax gap by initially focusing on tax returns for wealthy families, large corporations, and complex partnerships. While boosting the skilled staff needed for more intricate audits will take time, Everson said the IRS has no plans to increase the audit rate for households earning less than $400,000.
The agency is still investigating higher audit rates among Black Americans, as Werfel committed to during his confirmation hearing. The earned income tax credit, targeted at low- to moderate-income filers, is a contributing factor to the higher audit rate among Black Americans, according to research.
