Yellen outlines planned changes to IRS in $80 billion review


treasury secretary Janet Yellen on Thursday detailed some of the Biden administration’s plans for the Internal Revenue Service as part of the $80 billion funding increase, including expanding in-person services.

Speaking at an IRS facility in New Carrollton, Maryland, Yellen said the funding will help improve the IRS in the form of better technology and services for taxpayers, and stronger enforcement focused on corporations and wealthy Americans.

“The Inflation Reduction Act finally provides the funding to transform the IRS into a 21st century agency,” said Yellen. “While all the improvements won’t happen overnight, taxpayers can expect to feel real differences during the upcoming tax season.”

The funding was included in the Democrats’ climate change and health care spending bill, called the Reduce Inflation Act, which Biden signed into law last month.


Janet Yellen

Janet Yellen, pictured here giving a press conference in the Cash Room of the US Department of the Treasury in Washington, US, on July 28, 2022. (REUTERS/Jonathan Ernst/Reuters Photos)

Yellen said the money will go toward increasing services in IRS Tax Assistance Centers and projected that these centers will have the capacity to help about 2.7 million Americans in the upcoming filing season, up from 900,000 today.

In addition, he said the IRS will hire about 5,000 customer service representatives to improve the IRS answering service. (Currently, the IRS has only been able to answer about 2 out of 10 phone calls.)

Providing the IRS with an influx of funds has been a top priority for Democrats and emerged as one of the most prominent financiers of the $739 billion bill. But it has drawn fierce pushback from Republicans, who say a beefed-up IRS could ultimately hurt low-income Americans.

Internal Revenue Service

The Internal Revenue Service (IRS) headquarters in Washington, DC, USA, on Friday, February 25, 2022. (Photograph: Al Drago/Bloomberg via Getty Images/Getty Images)

That’s because the IRS disproportionately targets low-income Americans when it conducts tax audits each year. In fact, households making less than $25,000 a year are five times more likely to be audited by the agency than everyone else, according to a recent study. tax data analysis for fiscal year 2021 by the Transactional Records Access Clearinghouse (TRAC) at Syracuse University.

The reason for this is an increase in what are known as “correspondence audits,” which means the IRS conducts reviews of tax returns through letters or phone calls rather than more complex face-to-face audits. Only a fraction, 100,000 of the 659,000 audits in 2021, were done in person.

According to the Syracuse study, more than half of the IRS-initiated match audits last year (54%) involved low-income workers with gross earnings of less than $25,000 who claimed the earned income tax credit, a anti-poverty measure.

The discrepancy is primarily because high-income taxpayers have complex investments that can easily hide differences between taxes due and paid versus taxes reported and paid.

President Biden

President Joe Biden after signing HR 5376, the Inflation Reduction Act of 2022, in the State Dining Room of the White House on August 16, 2022. ((Photo by Demetrius Freeman/The Washington Post via Getty Images) / Getty Images)

Yellen has pushed back on that fear, reiterating Thursday that she directed the IRS not to increase audits of households earning less than $400,000 a year.


“Most importantly, I have directed that enforcement resources not be used to increase audit rates for households earning less than $400,000 a year relative to historical levels,” he said. “In fact, we expect audit fees for honest taxpayers to drop once the IRS has the right technology infrastructure in place. This means an easier filing season for taxpayers who are doing everything right.”

Revenues raised by the policies will go to initiatives designed to combat climate change and lowering pharmaceutical prices, as well as efforts to reduce the nation’s $30 billion debt. It includes about $433 billion in new spending, while about $300 billion of the new revenue collected would go to pay the nation’s deficit.


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