Erin Collins, national taxpayer advocate at the Taxpayer Advocate Service, speaks at a Senate Appropriations subcommittee hearing in Washington, D.C., on May 19, 2021.
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As the IRS faces scrutiny from a Republican-controlled Congress, the agency’s internal watchdog has urged lawmakers to preserve taxpayer service and technology funding.
The National Taxpayer Advocate on Wednesday released its annual report to Congress, which criticized the “extreme imbalance in funding priorities” when comparing the billions of dollars allocated via the Inflation Reduction Act.
While the tens of billions earmarked for enforcement has “generated controversy,” there’s been “strong bipartisan support” for taxpayer services and technology modernization, wrote Erin Collins, national taxpayer advocate.
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Of the original $78.9 billion Inflation Reduction Act funding, the legislation earmarked 58% for enforcement and 32% for operations support, according to the report. By comparison, the budget allocated 4% for taxpayer service and 6% for technology modernization.
With sufficient funding for services and technology, “taxpayer experiences will become fairer and more efficient, which likely will improve compliance and reduce the need for costly backend enforcement,” Collins wrote.
During fiscal year 2024, the IRS collected $98.7 billion through enforcement, which was less than 2% of all revenue, according to the agency’s 2024 financial report. The remaining 98% of federal taxes were “self-assessed” via annual tax returns and timely payments.
If Congress reduces enforcement funding, it shouldn’t include commensurate cuts to taxpayer services and technology, which could “inadvertently throw the baby out with the bathwater,” Collins wrote.
With added costs to “pull itself out of the pandemic” and yearly appropriations held steady amid rising costs over the past few years, the IRS has needed to spend part of its multi-year funding to maintain current operations, she added.
Congress rescinded $20 billion in IRS funding as part of a 2023 budget deal, and Republicans have vowed to make further cuts. Another $20 billion was automatically clawed back when lawmakers in December extended the 2023 deal to avoid a government shutdown.
Further IRS funding cuts could be possible in 2025 with Republican control of Congress and the White House.