The IRS has released a plan for the nearly $80 billion in funding enacted through the Inflation Reduction Act. The plan includes improvements to customer service, technology, and enforcement. In this article we will explore how the funding plan will affect taxpayers.
Boost Technology
The plan aims to help the IRS develop new technologies to make the tax filing process easier for taxpayers, such as tools to help identify errors before filing returns. These improvements could make it easier for taxpayers to comply with tax laws and reduce the likelihood of mistakes in filing their returns. Additionally, the IRS seeks to phase out its paper backlog within five years by moving to a fully digital correspondence process.
Focus on Customer Service
The IRS intends to hire more than 7,000 service representatives and 1,500 auditors with the aim of reducing wait times and being more accessible to taxpayers, leading to a more efficient and responsive system. Within the next five years, taxpayers should be able to file documents and respond to notices online as well as download their account information.
Lean In to Enforcement Efforts
The agency wants to crack down on tax evasion, and plans to utilize a portion of the funding to do so. This could mean an increase in audits. Taxpayers who may have cut corners in the past could face stricter penalties for non-compliance. However, increased enforcement could also lead to more compliance with tax laws, if there is a clearer standard of behavior and more deterrents for those who attempt to cheat the system.
Close the Tax Gap
The IRS plans to reduce the budget deficit by closing the tax gap, initially focusing on tax returns for large corporations, complex partnerships, and wealthy families. The boost in staffing will help to address these more complicated audits. The agency has been quick to point out that households making less than $400,000 will not be affected by an increase in audit rates.
