IRS Budget Increase Diminishes in Omnibus Spending Bill, Though New Funding Is Approved for Better Taxpayer Service

Internal Revenue Service sign on building

A $1.5 trillion omnibus spending bill passed by the U.S. House on Wednesday, Mar. 9 made a major cut to previously planned budget increases for the IRS, though the money the agency did get will help it deal with a backlog of unprocessed tax returns.

The House approved the bill with the aim of spending $14 billion in military, humanitarian and economic aid to Ukraine to assist with its battle against Russia, Accounting Today reported.

The IRS was supposed to receive a 14% budget increase for tax enforcement, technology upgrades, hiring and more. Instead, the bill provided only a 6% increase for the IRS, mainly to improve taxpayer service. It leaves out a number of items that were included in an earlier version approved by the House last summer.

Among the missing items were tax-related provisions to encourage more retirement savings, and a rollback of requirements for amortizing research and development costs under the Tax Cuts and Jobs Act. Major accounting firms, including KPMG and RSM US, urged Congress to repeal the latter requirements.

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Much of the increased funding will go toward improving taxpayer service. That’s been a key issue in the nation’s capital because of a backlog of millions of unprocessed tax returns left over from last year in addition to new returns arriving this tax season.

As previously reported by GOBankingRates, the IRS temporarily re-assigned about 1,200 employees last month to help the agency catch up on unprocessed returns and avoid delays on new returns.

The new spending bill provides up to $75 million to address the IRS’s paper inventory of amended returns, correspondence and adjustments to return filings, Accounting Today noted.

Overall taxpayer service will get a 9% budget increase, amounting to an additional $225 million. That includes $21 million for investigative technology at the IRS’s Criminal Investigation division. The agency’s tax enforcement division will also get an extra $225 million, which represents a 4% increase.

See: IRS Launches Taxpayer Experience Office to Improve Customer Service Amid Challenging Tax Season
Find: New IRS Life Expectancy Tables Could Change the Amount of Required Withdrawals for Retirement Plans

A 2% budget increase was approved for the Treasury Inspector General for Taxpayer Administration, thought that is below the 3% increase under the bill approved last summer.

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About the Author

Vance Cariaga is a London-based writer, editor and journalist who previously held staff positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal and Business North Carolina magazine. He holds a B.A. in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting earned awards from the North Carolina Press Association, the Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A native of North Carolina who also writes fiction, Vance’s short story, “Saint Christopher,” placed second in the 2019 Writer’s Digest Short Short Story Competition. Two of his short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. His debut novel, Voodoo Hideaway, was published in 2021 by Atmosphere Press.
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