Senate Finance Committee Chairman Ron Wyden asks IRS Commissioner Charles Rettig during a Senate Finance Committee hearing.
Tom Williams | Poole | Poole | Reuters
Senate Finance Committee Chairman Ron Wyden outlined five priorities for the nearly $80 billion IRS funding enacted in August through the Reducing Inflation Act.
In a letter to Treasury Secretary Janet Yellen and IRS Commissioner Charles Rettig, Wyden shared expectations for a decade of investments in customer service, technology, high net worth auditing, offshore tax evasion and criminal investigations.
These priorities, he wrote, take precedence over the introduction of other tax programs such as clean energy credits and health insurance subsidies.
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“As you explained, this funding will not be used to increase audit rates relative to historical levels for companies under $400,000,” Wyden emphasized.
Here’s a breakdown of the five priorities:
1. Strengthen customer service
Wyden urged the IRS to improve customer service by completing the backlog of outstanding tax returns by next year’s filing season, and pushed for infrastructure investment so that “those backlogs will return. I will try not to do this,” he said.
As of Sept. 23, the IRS had received 6.2 million outstanding individual returns this year, including tax returns for the 2021 tax year and late filings from the previous year, officials said.
2. Invest in technology
Wyden also called for technology upgrades to “improve service and execution.” This facilitates the processing of third-party tax returns, allowing errors to be flagged and audits initiated more quickly.
“Upgrading the system should help reduce the likelihood that the IRS will use this data to detect tax fraud and question accurate filings,” he wrote.
3. Increase audits of high net worth individuals
Wyden also emphasized the need to “rebalance audit rates” between wealthy and low-income taxpayers by hiring more revenue agents.
IRS audits fell 44% from fiscal 2015 to fiscal 2019, according to the Treasury Commissioner for Taxation’s 2021 report. Audits were down 75% for filers earning $1 million or more and down 33% for low- and middle-income earners claiming an earned income tax credit known as the EITC.
In 2021, the U.S. Treasury Department estimated that there will be a $600 billion annual “tax gap” between amounts owed and amounts collected.
4. Pursue tax evasion offshore
Another priority, according to the letter, is to crack down on the “hundreds and thousands of shell companies in offshore tax havens” that increase the risk of underreported income.
Wyden encouraged the IRS to develop a “stronger” whistleblowing program and work with individuals to “unravel sophisticated schemes.” He said the program has provided a “great return on investment.”
5. Restructuring Criminal Investigations
Wyden also called for hiring more special agents for the IRS’s Criminal Investigations Division, citing the loss of about a quarter of the IRS workforce since 2010.
The letter comes as IRS funding continues to be a hot issue among critics, who say the resources may be targeting everyday Americans.
However, Yellen responded to these allegations in a letter to Retig on 10 August.
“Specifically, the share of small businesses and households below the $400,000 threshold that will be audited compared to past levels, using additional resources, including new personnel and auditors hired. should not be increased,” she wrote.