Biden intends to enhance money for the IRS through the Inflation Reduction Act to assist the agency in catching crafty tax evaders, particularly wealthy earners who like finding legal loopholes.
The additional funds, according to a Treasury Department analysis from May 2021, would permit the organization to hire some 87,000 new people by 2031, including revenue agents, customer support representatives, and IT personnel.
IRS Additional Funding
Advocates think that by making tax fraudsters pay their dues, the extra financing might produce as much as $1 trillion, especially after years of budget cuts have destroyed the system. However, some detractors fear that the greater monitoring of taxpayers could have disastrous consequences.
The IRS will be able to replace its aging workforce and update its infrastructure with the $80 billion in funds distributed over the next 10 years. 50,000 of the IRS’s 80,000 employees are set to retire in the next five years.
The organization has apparently been 20% underfunded for a decade, which has forced it to limit staffing levels and technological advancements.
The IRS has long needed more support and resources due to its outdated processing infrastructure and a backlog of millions of unprocessed paper submissions.
Additionally, there has been a terrible staffing shortage in the customer support division. Only 10% of filers’ phone calls to the IRS during the 2022 filing season were actually answered.
IRS Loses $1 Trillion in Unpaid Taxes Each Year
In addition to these problems, former IRS Commissioner Charles Rettig calculated in 2021 that the organization was losing $1 trillion in unpaid taxes annually, primarily as a result of tax evasion by the wealthy and large corporations. Additionally, he suggested that they might be evading detection in part because of the bitcoin market’s lax regulation, foreign source income, and pass-through procedures that are being abused.
Rettig has frequently spoken in favor of increased funding to call on the fire-breathing dragons to punish cheaters. According to proponents, the monies will aid in closing the tax gap by aiding in the arrest of more tax cheats.
A total of $80 billion has been set aside, with $45.6 billion designated for greater enforcement. This money will be used to hire more enforcement officers, provide legal support, and purchase investigative technologies to decide who should or shouldn’t be audited. But not everybody is delighted with the information.
They won’t receive this “magic money,” Brian Reardon told Bloomberg. Reardon is the leader of the S Corporation Association, a group that advocates for privately held, small companies that pay their shareholders’ taxes.
The Biden administration, however, insists that the greater enforcement will only apply to major enterprises and the extremely rich, not too small businesses or households with annual incomes under $400,000.
The top 1% of Americans may be evading taxes worth up to $163 billion annually, according to research from the Department of the Treasury.