IRS head foresees a decline in agency's performance if budget and workforce are reduced
The Internal Revenue Service (IRS) has started the 2024 tax filing season with an unprecedented infusion of cash from the Inflation Reduction Act (IRA), which has significantly improved its capabilities and performance. However, the future of this funding is uncertain, as more than $40 billion of the original $80 billion allocated in the IRA has been revoked or frozen, leaving the IRS in a precarious position.
Commissioner Danny Werfel and his team have been working diligently to ensure the IRS maintains its progress, even as they prepare to engage with the incoming administration and lawmakers. Werfel has stated that if the funding disappears, the agency will revert to long wait times and limited enforcement, a stark contrast to the improvements seen this year.
The IRS has made strides in expanding taxpayer services, with plans to double the number of states where taxpayers can file directly through the agency. Additionally, Werfel has announced plans to increase taxpayer assistance center hours, rural outreach, and tax counseling. However, if the remaining funds are rescinded, it may undo much of the work Werfel has overseen.
The IRS workforce has also grown, eclipsing 100,000 employees in fiscal 2024, according to the National Taxpayer Advocate. Yet, if the funding from the IRA disappears, the workforce will contract while the level of work will remain the same. This could lead to difficult workforce decisions in the next year or two.
If the Republicans in Congress withdraw the remaining funds from the IRA for the IRS, the agency would likely face significant budget cuts. This could hinder its ability to enforce tax laws, improve taxpayer services, and implement climate-related tax provisions embedded in the law. This would reduce the IRS’s operational capacity and potentially impact the effectiveness of measures aimed at reducing inflation and supporting climate initiatives.
Commissioner Werfel and his team are prepared to engage with Congress and new Treasury leadership to explain the implications of these budget constraints. If the funding is not rescinded, the IRS will need to have a good, robust dialogue with Congress and new Treasury leadership about budget constraints to ensure continued progress.
Despite the uncertainty, Werfel has focused on the tax filing season, not commenting on whether he will step aside or force Trump to fire him. President-elect Trump has nominated former Rep. Billy Long, R-Mo., to take over the IRS, despite Werfel's term not expiring until 2027.
The future of the IRS remains uncertain, with the fate of the IRA funds a critical factor in its ability to continue its progress and serve taxpayers effectively.
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