The IRS hasn't fully updated its plans to incorporate the tens of billions of dollars in additional funds provided by the Inflation Reduction Act, a Government Accountability Office (GAO) report found, Accounting Today reported.

Some of the funds allocated to the IRS by the law are for replacing legacy IT systems, giving taxpayers more online tools and services, and protecting taxpayer privacy and security, but the IRS  has yet to update its plans to incorporate these additional funds, the report found. For example, the IRS needs to make changes to the scope and milestones of its IT modernization programs.

The IRS reported meeting most of its quarterly targets regarding cost and schedule performance of IT modernization programs for fiscal years 2022 and 2023, the GAO found, but it noted that these reports could be improved by including such programs' historical cost and schedule goals, and how quarterly performance compares to overall program goals.

Part of the reason for the lack of fuller implementation is the threat of funding rescissions, Accounting Today reported. More than $21 billion in funding over a decade for tax enforcement was cut from the $80 billion total appropriated by the Inflation Reduction Act as part of the bipartisan deal to lift the debt limit and was distributed to other federal agencies. To avert the threat of a government shutdown in January, government leaders agreed to accelerate those cuts, Accounting Today reported at the time.

"With historic funding through the new law, we're building an IRS where all taxpayers can meet all their responsibilities, including all interactions with the IRS—from questions to payments to resolutions—in a completely digital manner if they choose," IRS Commissioner Danny Werfel said during a speech on March 18 at American University's Kogod School of Business, Accounting Today reported. "We're catalyzing this transformation because a digital-first IRS is a generational imperative. It's how most taxpayers want to interact with us in the 21st century."

The GAO made three recommendations to the IRS to complete a technology roadmap, update individual modernization plans, and improve its reporting on modernization progress:

● The IRS commissioner should complete the enterprise roadmap and ensure it addresses the strategic operating plan's technology objective;

● The IRS commissioner should complete plans for its modernization programs that include (1) milestones to complete the modernization, (2) a description of the work necessary to complete the modernization, and (3) details regarding the disposition of the legacy system, if applicable; and

● The IRS commissioner should include information such as a history of programs' cost and schedule goals and it should show how the quarterly cost and schedule performance aligns with fiscal year and overall goals for the programs in its quarterly reports to Congress.

The IRS agreed with all three recommendations. In response to the report, it also stressed the need for continued funding from Congress.

"Of notable importance to the House and Senate Appropriations Committees, we also emphasize that although [Inflation Reduction Act] funding has enabled the IRS to make progress, much work remains," wrote Melanie Krause, acting deputy commissioner for operations support for the IRS, to Accounting Today. "In tandem with the critical multiyear funding from the [Inflation Reduction Act], the IRS needs its annual discretionary budget to include increases to maintain the current levels of staffing, systems and service and to avoid our needing to cannibalize [Inflation Reduction Act] funding just to keep the lights on, and we need Business Systems Modernization (BSM) appropriation restored because successfully executing the [strategic operating plan] depends on both [Inflation Reduction Act] funds and BSM funds. Without restored BSM annual funding, we will not be able to deliver the transformational modernization the [Inflation Reduction Act] promised and taxpayers deserve."