The Tax Times: The IRS’s Inflation Reduction Act Spending Through March 31, 2026

On September 1, 2026, the Treasury Inspector General for Tax Administration (TIGTA) released its fourth periodic snapshot of how the IRS has spent its Inflation Reduction Act (IRA) funding — Report Number 2026-IE-R014, titled "Snapshot: The IRS's Inflation Reduction Act Spending Through March 31, 2026." The report is informational only — TIGTA made no recommendations — but the numbers tell a clear story about where the IRS's modernization dollars are going, how quickly the agency's remaining IRA funding is shrinking, and what that could mean for enforcement activity and taxpayer service levels going forward (TIGTA; Oversight.gov).

For practitioners advising clients on audit exposure, IRS responsiveness, or the trajectory of enforcement priorities, this report is worth a close read. Here is what it says and why it matters.

From $79.4 Billion to $26 Billion: A Funding Pool That Keeps Shrinking

When Congress enacted the Inflation Reduction Act of 2022 (Pub. L. No. 117-169), it supplied the IRS with roughly $79.4 billion in supplemental, multi-year funding available through September 30, 2031. Since then, four separate pieces of legislation have clawed back a combined $53.5 billion of that amount, leaving the IRS with just $26 billion in current IRA funding:

Legislation	Rescission
Fiscal Responsibility Act of 2023 (Pub. L. No. 118-5)	$1.4 billion
Further Consolidated Appropriations Act, 2024 (Pub. L. No. 118-47)	$20.2 billion
Full-Year Continuing Appropriations and Extensions Act, 2025 (Pub. L. No. 119-4)	$20.2 billion
Consolidated Appropriations Act, 2026 (Pub. L. No. 119-75)	$11.7 billion

Of the total rescissions, $41.8 billion came out of Enforcement funding and $11.7 billion came out of Operations Support — meaning the cuts have disproportionately hit the exact activities (audits, collections, and technology upgrades) that were supposed to close the tax gap.

The IRS Has Already Spent 64 Percent of What's Left

As of March 31, 2026, the IRS had spent approximately $16.5 billion — 64 percent — of its remaining $26 billion in IRA funding. Spending has been especially aggressive in two categories:

· Enforcement: $3,763,063,413 spent against $3,847,875,000 available — 97.7 percent exhausted.

· Taxpayer Services: $2,766,386,168 spent against $3,181,500,000 available — 86.9 percent exhausted.

By contrast, the Technology and Operations Support category still had $8.6 billion remaining, while Enforcement had only $85 million left and Taxpayer Services only $415 million. In plain terms: the enforcement and taxpayer-service buckets are nearly dry, while technology modernization dollars are the primary funding still in reserve.

Cumulatively, employee compensation ($7.7 billion) and contractor advisory and assistance services ($5.4 billion) are the two largest categories of IRA spending recorded to date.

Spending Has Slowed Sharply in FY 2026

The pace of spending has dropped considerably. From October 1, 2025, through March 31, 2026 (the first half of FY 2026), the IRS spent about $787 million in IRA funds — down from roughly $2 billion during the preceding six-month period (April through September 2025). IRA-funded labor costs followed the same pattern, falling from about $1.2 billion in that prior six-month window to just $410 million in the first half of FY 2026.

That slowdown lines up with a wave of workforce reductions. Since January 2025, the IRS has run three rounds of Deferred Resignation Program offers plus voluntary early retirement and separation incentives. In total, 21,647 employees accepted a deferred resignation offer and 9,626 more separated through early retirement, buyouts, or voluntary departure. Fewer staff, unsurprisingly, means less IRA-funded payroll spending.

IRA Funds Are Quietly Propping Up Day-to-Day Operations

One of the more notable findings: IRA money isn't only funding new initiatives — it's backfilling the IRS's regular annual budget. IRS officials told TIGTA that approximately $5.1 billion in IRA funds have been used to supplement annual discretionary appropriations, covering $3.5 billion in labor costs and $1.3 billion in IT operating and maintenance costs. This became necessary in part because of lapses in annual appropriations in October 2025 and February 2026.

For clients wondering why phone service, correspondence turnaround, or exam staffing feels inconsistent, this dynamic — a shrinking supplemental fund plugging holes in an already tight base budget — is part of the explanation.

Why the Rescissions May Cost More Than They Save

The Congressional Budget Office's own estimates suggest the enforcement rescissions are a net revenue loser, not a saver. CBO originally projected in October 2022 that IRA-funded enforcement would generate $204 billion in revenue through FY 2031. After the first two rescissions, CBO estimated in February 2024 that a $35 billion cut would reduce federal revenue by $89 billion from FY 2024 through FY 2034. Most recently, in January 2026, CBO estimated that rescinding the additional $11.7 billion in the FY 2026 appropriations bill would reduce revenues by $2.7 billion in 2026, $25.6 billion cumulatively through 2030, and $38.6 billion cumulatively through 2035.

In other words, every dollar of enforcement funding cut has historically been projected to cost the Treasury multiple dollars in foregone collections. That's a data point worth citing when clients ask whether reduced IRS staffing means reduced audit risk — the agency's own budget trajectory suggests Congress does not view enforcement cuts as cost-free.

Contractor Spending and Cancelled Contracts

Contractors have absorbed a large share of IRA dollars. Since enactment, the IRS has paid approximately $5.4 billion in IRA funds for contractor "advisory and assistance services" — spanning management and professional support, IT studies and analyses, and engineering/technical services tied to systems modernization.

At the same time, the IRS has been unwinding a significant number of IRA-related contracts. As of March 31, 2026, the agency had cancelled 167 IRA-related or IRA-funded contracts, having already paid $784 million on them before termination, with $8 million more in unliquidated (incurred but unpaid) obligations. The cancellations reduced total obligations by $127 million. Affected projects reportedly touched the Office of Digital Assets Initiative, business accounts, the Integrated Data Retrieval System, enterprise data platform migration, cybersecurity architecture, enterprise case management, and data-at-rest encryption — mostly IT modernization efforts.

A New Strategic Plan Is Coming

The report also flags an organizational shift: the IRS's original 2023 IRA Strategic Operating Plan (updated in 2024) is being replaced. Following Treasury's release of its Strategic Plan 2026–2030 in April 2026 — which prioritizes goals like Main Street growth, taxpayer-dollar stewardship, national security, and operational efficiency — the IRS intended to publish its own new five-goal strategic plan by August 2026, superseding the original SOP. Practitioners should watch for that plan's release, since it will likely reset the agency's modernization and enforcement priorities for the remainder of the decade.

Practical Takeaways for Practitioners and Clients

· Enforcement funding is nearly spent (97.7 percent), but that doesn't necessarily mean audit activity drops immediately — much of that money already funded hiring, training, and case inventory that will keep working through the system, and CBO's own projections tie enforcement funding directly to future collections.

· Taxpayer service funding is also nearly exhausted (86.9 percent), which may explain continued strain on phone lines, correspondence exam response times, and practitioner hotline access.

· Technology dollars remain the deepest reserve ($8.6 billion left), suggesting future IRA spending will skew toward IT modernization rather than new enforcement hires or expanded service staffing.

· Workforce attrition has been substantial — over 31,000 separations combined from deferred resignation and other voluntary programs — which has real implications for case assignment timelines, EA/CPA power-of-attorney processing, and IRS response speed on client matters.

· Watch for the IRS's new FY 2026–2030 strategic plan, expected to reshape stated priorities around service, enforcement, and technology.

Bottom Line

TIGTA's 2026-IE-R014 snapshot confirms that the IRS's IRA funding cushion has shrunk dramatically — from $79.4 billion to $26 billion — and that what remains is being spent quickly, with enforcement and taxpayer service categories nearly depleted while technology modernization retains the largest reserve. Combined with historic workforce reductions and CBO projections tying enforcement cuts to significant revenue losses, the report offers useful context for any conversation with clients about what to expect from the IRS in the coming months: continued staffing constraints, a heavier reliance on legacy annual appropriations, and a pending strategic pivot once the agency's new plan is released.

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