As the Internal Revenue Service (IRS) navigates heightened scrutiny from a Republican-led Congress, the agency’s internal watchdog has emphasized the importance of preserving funding for taxpayer services and technological advancements.
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In its annual report to Congress released on Wednesday, the National Taxpayer Advocate raised concerns about what it termed an “extreme imbalance in funding priorities.” This disparity was highlighted when comparing the billions allocated under the Inflation Reduction Act.
While significant funding has been directed towards enforcement—a topic that has sparked controversy—there has been “strong bipartisan support” for improving taxpayer services and modernizing technology, noted Erin Collins, the National Taxpayer Advocate.
Of the original $78.9 billion provided through the Inflation Reduction Act, 58% was earmarked for enforcement and 32% for operations support, according to the report. In contrast, only 4% was allocated for taxpayer services and 6% for technology modernization.
Collins argued that adequate funding for these areas would lead to a fairer and more efficient experience for taxpayers, potentially increasing compliance and reducing the need for expensive enforcement measures.
In fiscal year 2024, enforcement actions by the IRS generated $98.7 billion—accounting for less than 2% of total revenue collected. The remaining 98% came from “self-assessed” federal taxes through annual returns and timely payments, the agency’s 2024 financial report revealed.
Collins cautioned that any reductions in enforcement funding should not come at the expense of taxpayer services or technology, as doing so could undermine essential aspects of the IRS’s mission. She warned against “throwing the baby out with the bathwater” in pursuit of budget cuts.
Over recent years, rising costs and the added burden of recovering from pandemic disruptions have forced the IRS to use portions of its multi-year funding just to sustain current operations.
Despite these challenges, Congress rescinded $20 billion in IRS funding as part of a 2023 budget agreement, with Republicans signaling intentions to pursue further cuts. An additional $20 billion was automatically retracted when lawmakers extended the 2023 budget deal to avert a government shutdown.
Looking ahead, further reductions in IRS funding remain a distinct possibility, particularly if Republican control extends to both Congress and the White House in 2025.
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