The $80 billion in additional funding allotted to the IRS by the Inflation Reduction Act was intended to provide better customer service and enforcement, among other things. But some finance professionals and politicians are concerned about the possibility of increased audits, Accounting Today reported.
Despite assurances from Treasury Secretary Janet Yellen and IRS Commissioner Chuck Rettig that no part of the extra funding will be used to target taxpayers making less than $400,000 annually, Republicans on the Senate Finance Committee plan to introduce legislation to make such a prohibition explicit.
The move comes after Senate Republicans failed to get such an amendment included in the Inflation Reduction Act itself, according to Accounting Today. The Republican bill would prohibit the hiring of more employees until customer services improves.
But such a prohibition could prevent the IRS from improving its services, such as clearing the backlog of unprocessed tax returns from the past two years and dealing with expected requests for extensions, according to Accounting Today. The IRS also has new duties mandated under the Inflation Reduction Act, such as provisions for renewable energy incentives, electric vehicle tax credits, a new "book tax" on billion-dollar corporations an excise tax on corporate share buybacks and a study on implementing its own online tax filing system.
Some tax professionals expressed skepticism that the IRS would refrain from using the extra funding from the Inflation Reduction Act to audit taxpayers earning under $400,000 year. Accounting Today reported about a recent online poll conducted by Sikich, a Chicago firm, which asked 250 owners and finance officers of midsized businesses about their attitudes toward the Inflation Reduction Act. Out of the 250 respondents, 202 (80.8 percent) said they believed that the increased IRS enforcement activities would affect those with an income of less than $400,000 per year, while 48 (19.2 percent) said they believed these activities would not.
"With the IRS getting that much additional funding and doing more audits, it's probably going to affect people at all levels and businesses as well," said Jim Brandenburg, a tax partner at Sikich told Accounting Today.
He added that he was also skeptical about the Republicans’ dire warnings that 87,000 agents will target middle-class taxpayers. And he said that he believes that the IRS needs to hire to replace retiring employees, as well as to improve service.
Todd Simmens, technical practice leader of tax policy and legislation at BDO USA, agreed.
"They have to get more agents, but they have to put them in other places too," he told Accounting Today. "They've got to get folks to process returns, answer phone calls—lots of those things that are just not happening right now."