In July 2021, the House of Representatives, Committee on Appropriations, requested that TIGTA “review the IRS’s strategy to recruit and train employees to conduct audits of high earners and large businesses that underreport income as well as to collect taxes from taxpayers who have the ability to pay their outstanding debts, while also protecting taxpayer rights in the course of its enforcement efforts.”
IRS enforcement function full-time equivalent employees have declined from Fiscal Years (FY) 2010 through 2021 due to budget decreases. This reduction to enforcement function staffing levels has affected the total enforcement revenue collected by the IRS. This audit was initiated to evaluate the IRS’s strategy to recruit employees to conduct audits of high earners and large businesses. A separate report on the IRS’s examination training strategy will be issued later this fiscal year
What TIGTA Found - Does not matter after the Debt Limit Bill!
The IRA provided the IRS with approximately $45.6 billion dedicated to enforcement activities. On May 19, 2021, in written testimony to the Subcommittee on Financial Services and General Government, the IRS Commissioner stated that, among other operational directives, this appropriation will facilitate the hiring and training of auditors to focus on complex investigations of large businesses, partnerships, and global high-wealth taxpayers. The IRS has initiated planning efforts to hire these employees, with the majority working in the IRS’s Large Business and International (LB&I) and Small Business/Self-Employed (SB/SE) Divisions.
Reductions to IRS enforcement function staffing levels over the last decade have affected the total enforcement revenue collected. The IRS estimated that the gross annual Tax Gap for Tax Years 2014 to 2016 was $496 billion, and projects that for Tax Years 2017 to 2019, it will increase to $540 billion per year. A reduction in the number of enforcement function employees may affect the IRS’s ability to maintain sufficient audit coverage of entities and individuals contributing the most to the Tax Gap and limit its efforts to collect the taxes taxpayers acknowledge they owe but have not paid.
The IRS estimates that, with existing hiring actions and expected attrition, the LB&I Division could hire approximately 450 positions and the SB/SE Division could hire approximately 2,300 positions without exceeding their authorized staffing levels.
However, The Hiring Surge Of 10,000 Employees To Assist In Reducing The Tax Return Filing Backlog For The Wage And Investment Division’s Submission Processing And Accounts Management Functions Has Prevented The LB&I And SB/SE Divisions From Hiring More Employees To
Increase Audits Of High Earners.
Further, the LB&I and SB/SE Divisions have not maintained their authorized staffing levels with normal attrition and the hiring of new employees to replace those who have left the business units.
A draft of the SB/SE Division’s FY 2023 hiring goals includes additional revenue agent hires. Increased examination hiring is also part of the LB&I Division’s overall hiring plan for FY 2023. The IRS issued the IRA Strategic Operating Plan in April 2023.
Now All of Those Aspirational Objectives to Guarantee
Fairness in The Tax System Are ALL GONE
as a Result of the Debt Limit Bill!
The $20 billion in IRS funding cuts included in the debt limit deal reached by President Joe Biden and House Speaker Kevin McCarthy would be part of the largest-ever rescission of previously authorized funding, the chair of the House tax panel said Tuesday, May 30, 2023 in urging colleagues to support the bill.
$10 Billion Reduction In IRS Funding In Each Of Fiscal
2024 And 2025, According To A White House Source
And Congressional Republicans.
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