Congress Could Make It Harder To File Taxes By Getting Rid of New IRS Funding

IRS Internal Revenue Service documents and folder.
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In August, the Biden administration announced details regarding the sweeping Inflation Reduction Act (IRA). While much focus has been put on the act’s plans to cap prescription prices for Medicare beneficiaries — as well as the large tax credits for buying electric vehicles — a third tier of the IRA is related to taxes, including an $80 billion investment into the Internal Revenue Service (IRS) budgeted for the next 10 years. Divided up, it’s meant to supply “$25 billion for operations, $5 billion for technology modernization and $45 billion for tax enforcement,” according to Fortune.

However, not all of Congress has supported this measure. While the IRA was overwhelmingly passed by Senate Democrats, all 50 Republican Senators were opposed and voted against it, per Fortune, noting they were not in favor of the potential for more Americans to face audits.

IRS Commissioner Charles Rettig pushed back against that theory, claiming that the audit potential for those making under $400,000 will not change — and that the increased tax enforcement capabilities are meant to target “large corporate and high-net-worth taxpayers” to close the “tax gap.” However, Rettig’s words have not persuaded Republican critics of this legislation.

Forbes writer Howard Gleckman speculated that, once the House of Representatives elects a speaker, a Republican-led House will quickly move to reverse the terms of the IRA. One pending piece of legislation aims to “eliminate 90% of the new funding,” per Forbes.

What the Republican proposal would keep is $8 billion of the $80 billion earmarked for modernization of tax programs. However, this may not be enough to fully update the agency’s antiquated infrastructure. Given the lack of spending (of note, I.T. related infrastructure, per Forbes) taxpayers may suffer increased wait times and other inefficiencies in tax years to come. Further, Gleckman argued that cutting the IRS budget could make it easier for corporations (and high earners) to “cheat” on their annual returns.

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