May 3, 2024 

The IRS is improving edition. Back in 2022, as part of President Biden’s Inflation Reduction Act, the Internal Revenue Service received an additional $80 billion over a decade to modernize. $20 billion of that money was “clawed back” as a result of an agreement between Republicans and the White House to suspend the national debt limit and prevent the U.S. from defaulting on its financial obligations. Now some in Congress would like to see the agency’s budget shrink further, not grow. 

But the facts are in as to how the IRS is making use of its new funds – and the news is good, particularly for taxpayers with modest incomes.  

First, this year, the agency launched a pilot program known as Direct File, which allowed taxpayers to file easily and for free, instead, in some cases, of having to fork over their hard-earned dollars to companies such as H&R Block and TurboTax. 

Second, the IRS invested in modernizing its workforce – and greatly reduced a backlog in unprocessed paper tax returns. It also greatly reduced wait times for taxpayers trying to call the agency for help – although there is still progress to be made in this area. 

Third, the agency increasingly is pursuing tax cheats and making them pay their bills – earlier this year, the agency announced it already has collected hundreds of millions of dollars through this process. In previous years, lower-income people were audited disproportionately because such audits require less technical expertise and are thus easier to conduct. This meant that Black and Latino taxpayers, more likely to have low incomes, were also more likely to get audited. 

We fully expect that some in Congress this year will again go after the IRS budget – the attacks are likely to continue next Tuesday, when IRS Commissioner Danny Werfel testifies before a House subcommittee. 

We’ll be watching, well aware of the good work the new and improved IRS has accomplished.