With nearly $80 billion allocated* to the Internal Revenue Service (IRS) by the Inflation Reduction Act of 2022, taxpayers may be wondering how those funds will be spent and how that will impact them.
The IRS recently revealed its Inflation Reduction Act Strategic Operating Plan with a roadmap for how the funds will be used over the next decade. The agency intends to transform how it delivers tax services by modernizing its systems and technology to make tax filing easier and strengthening auditing to enforce tax laws more effectively.
*Pending legislation around the debt ceiling could impact the actual amount.
Five Key Goals of the Plan
The IRS recognizes that the increased funding presents a historic opportunity to improve tax administration and services for taxpayers and tax professionals. It outlined five main objectives in the strategic plan:
|1||Dramatically improve taxpayer service and help taxpayers receive the tax incentives for which they are eligible
|2||Quickly resolve taxpayer issues
|3||Expand enforcement on taxpayers with complex tax filings and high-dollar noncompliance to address the tax gap
|4||Use cutting-edge technology, data, and analytics to operate more effectively
|5||Attract, retain, and empower a highly-skilled, diverse workforce and develop a culture that is better equipped to deliver results for taxpayers|
Several initiatives and projects are assigned under each objective. A total of 42 key initiatives, 190 key projects, and more than 200 target milestones are set forth for achieving these objectives.
Modernizing Systems to Make it Easier for Taxpayers
Much of the budget will be spent on providing taxpayers with world-class customer service. The agency plans to improve technology infrastructure to fully digitize forms, returns, and communications and provide taxpayers with more tools to make compliance easier. The goal is to eliminate paper backlogs and create a more seamless filing process while protecting taxpayer data.
Expanding Audits of Large Businesses, High-Income Individuals
More than half of the funding will be dedicated to ensuring fair tax law enforcement and compliance with existing laws. This includes reducing the deficit by hundreds of billions by pursuing tax evasion by wealthy individuals, big corporations, and complex partnership structures.
The plan calls for increased enforcement efforts targeting large businesses and households earning more than $400,000 annually to decrease the annual tax gap. The IRS estimates that individuals and businesses collectively pay about 85% of the total taxes they owe. It will hire more experienced accountants and attorneys to ensure enforcement “at the top.” It doesn’t plan to increase the audit rate for small businesses or households making less than $400,000.
Breakdown of the Funding
“We will make it easier for taxpayers to meet their tax responsibilities and receive tax incentives for which they are eligible. We will adopt a customer-centric approach that dedicates more resources to helping taxpayers get it right the first time, while addressing issues in the simplest ways appropriate. We will address noncompliance, using data and analytics to expand enforcement in certain segments. We will become an employer of choice across government and industry. These changes will enable us to serve all taxpayers more equitably and in the ways they want to be served,” says Commissioner Daniel I. Werfel, who issued the IRS strategic plan.
Preparing for the Future with Aldrich
Taxpayers are encouraged to work with their tax advisors. IRS audits and inquiries happen. Ensure you follow the appropriate record retention best practices so you’re prepared. If you received an IRS notice or want more advice on how you may be impacted, reach out to the tax planning experts at Aldrich Advisors.
Meet the Author
Sara Northcutt, CPA
Aldrich CPAs + Advisors LLP
Sara Northcutt joined the firm in 2005 and has more than a decade of experience working on a wide range of clients, including financial lending, private equity, real estate, and other closely held businesses. Sara specializes in multi-state tax compliance. Sara received her Bachelor of Arts degree from Vanguard University of Southern California and did her... Read more Sara Northcutt, CPA
- Closely-held businesses
- Certified Public Accountant
- Strategic tax planning and compliance