The IRS has been doing more with fewer resources since 2010. Over the past decade, the Internal Revenue Service lost around 17,000 staff for a variety of reasons such as an overall 22 percent budget cut, as well as retirement and attrition, according to reports.
From 2010 to 2020, the total tax returns that the IRS processed increased by 13 percent, while the budget, (inflation-adjusted) declined by 20 percent. On the same side of the coin, the number of FTE employees declined by 22.4 percent.
Related | COVID-19 Impacts IRS Operations
The IRS plans to hire thousands of auditors creating the biggest IRS hiring wave in a couple of decades.
The plan is for the small business and criminal investigations divisions to add thousands of new tax enforcement employees, so long as Congress passes a massive infrastructure plan that involves a $40 billion budget line influx to the IRs. The agency’s small business unit plans to add 2,000 new employees before September 30, 2021, the IRS’ fiscal year-end, Tax Practice Advisor reported last week. The criminal investigations unit would hire at least 500 people this year.
The goal would be to collect taxes that haven’t been being collected, a former commissioner told the Washington Post. The bipartisan infrastructure plan’s goal aims to close the tax gap and is estimated to raise a $100 billion net gain in tax revenue.
Officials had testified in 2017 that the IRS’ resources had been cut too much to perform duties, like investigate sophisticated tax avoidance. Others have said the IRS’ strategies have not advanced with technological advancements. Amid the combination of technology and personnel needs, the IRS faced criticism for decreasing audit rates for corporations and high net worth individuals. During that timeframe from 2010-2018, the Congressional Budget Office reported that examinations of individual tax returns fell by 46 percent and audits of corporate tax filings dropped by 37 percent.
Even if the infrastructure plan doesn’t pass, it’s still likely the IRS will be in a position to increase capacity given a funding boost Congress has on the docket for 2022.
If you have any questions regarding tax controversy, email Tomika Bullet, CPA.
