President Joe Biden is seeking more than $ 1 billion in additional funding for the IRS. This shows that his government is serious about providing the agency with the resources it needs to screen more wealthy individuals and large corporations.
The proposed base budget of $ 13.2 billion for fiscal 2022 would increase by $ 1.2 billion, or 10.4%, from the 2021 level, the administration said in its funding request published on Friday. The IRS would receive an additional $ 417 million increase in tax enforcement as part of a multi-year initiative to improve tax compliance and revenue. Overall, the request would add $ 0.9 billion to enforcement resources.
The IRS will be able to use the additional funds to improve oversight of high-income taxpayers and corporate taxpayers, provide new online tools to make it easier for employees to communicate with the agency, and telephone and face-to-face customer service as appropriate Improve funding request.
The request is a marker of the administration’s priorities, but the actual funding levels are determined by Congress. Both Democrats and Republicans have signaled support for replenishing the agency’s resources in recent years after nearly a decade of budget cuts that resulted in the loss of more than 20,000 employees.
Biden’s proposal is expected to be followed in the coming weeks by the comprehensive enforcement initiative mentioned in the funding application, which is aimed at wealthy individuals and companies. The proceeds from these efforts would be used to fund other management priorities, including the recent $ 2.25 trillion infrastructure package.
The higher household numbers are due to reports suggesting the IRS is struggling to keep up with wealthy taxpayers, who typically have the most complicated returns and access to the best tax planners money can buy.
Kevin Brady (R-Texas), a member of the House Ways and Means Committee, told reporters Thursday, prior to the budget request, that the IRS needs to be smarter about how it tracks tax revenues during audits. A more targeted and smarter audit could help bridge the gap in taxes paid and owed, he said.
In a paper published in March, it was estimated that 1% of households are not reporting 21% of their income, partly because random IRS audits fail to detect the most sophisticated tax evasion strategies for offshore accounts and private businesses. The paper also estimated that collecting unpaid federal income taxes from this population would increase federal revenues by approximately $ 175 billion per year.
“You can change the underlying tax rules so that games are less attractive, especially by adjusting tax rates and reducing tax havens. However, unless you have a fundamentally functioning tax collection system to ensure these rules are followed, you are not maximizing, ”said Chye-Ching Huang, executive director of the Tax Law Center at NYU Law Thursday during a committee webinar for one responsible federal budget.
IRS Commissioner Charles Rettig said a larger budget will help the IRS address its audit deficits and technological challenges, but also stressed that it could not be a one-time investment.
“Multi-year, consistent and adequate funding is vital,” he said at a congressional hearing earlier this year. He is due to testify in front of the Senate Finance Committee on Tuesday.
– With the support of Lydia O’Neal and Kaustuv Basu.