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Despite More Funding for Enforcement, IRS Faces Shortage of Trained Accountants

By:
S.J. Steinhardt
Published Date:
Nov 28, 2022

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The IRS will use about $46 billion of the $80 billion appropriated to it by the Inflation Reduction Act for increased enforcement, but the money alone may not be enough, Accounting Today reported.

The agency aims to use the funding for, among other things, hiring about 87,000 employees through 2023, including auditors, technology specialists and customer service representatives. But those numbers are offset by an estimated 52,000 employees eligible to retire or resign within the next six years, along with a shortage of trained accountants.

The number of employed accountants and auditors fell by 17 percent between 2019 and 2021, Bloomberg estimated, and the number of students graduating with an accounting degree continues to decline, according to the AICPA 2021Trends report.

Federal pay scales may also pose a problem for the IRS.

“Some people might like a government job, but most aren't attracted to statutory salary caps,” Scott Bishop, the executive director of wealth solutions at Avidian Wealth Solutions in Houston, told Accounting Today. “My CPA friends can't find good quality tax staff. Why does the IRS think it's going to be able to?”

Increased enforcement is supposed to close the so-called tax gap, currently estimated as $600 billion annually in uncollected taxes. That amounts to 3 percent of GDP.

The IRS also has to enforce tax collection in two new areas. One requires those who received more than $600 in a calendar year from apps and online marketplaces such as Venmo and eBay to receive tax documents. That is a change from last year’s threshold of $20,000 earned through at least 200 transactions. Also, starting in 2021, taxpayers were asked about their crypto holdings, which the IRS considers to be property and not money. Starting next year, all U.S.-based crypto exchanges must issue tax documents to investors and the IRS.

These two areas “will affect people at all income levels,” Steven Novack, a senior financial advisor at Altfest Personal Wealth Management in New York, told Accounting Today, He added that small businesses, gig workers and cash-intensive operations such as restaurants may come under increased scrutiny.