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IRS Improvements Threatened by Potential Budget Cuts

S.J. Steinhardt
Published Date:
Nov 6, 2023

The IRS's new business tax accounts, which will allow companies to view and track their taxes, and its improvements to its online tax professional accounts, may be in jeopardy if House Republicans succeed in reducing the agency’s budget, Accounting Today reported.

The House voted last week to provide $14.3 billion in aid to Israel, mainly to be paid for with cuts to the nearly $800 billion in funding that the IRS received from the Inflation Reduction Act . That would come on top of the $1.4 billion cuts in payments to the IRS made earlier this year as part of the deal to avert a default.

The bill passed by the House is opposed by senators in both parties, as it does not include aid to Ukraine and Taiwan. President Joe Biden has also threatened to veto it.

Last week, IRS Commissioner Daniel Werfel said, "This type of the cut, over the cost of the Inflation Reduction Act, would actually cost taxpayers $90 billion—that’s with a ‘B,'" The Washington Post reported. The Congressional Budget Office estimated that the House bill would add $12.5 billion to the deficit through 2033—far less than Werfel’s estimate of $90 billion—and projected that it would result in $26.8 billion in lost tax revenue.

In addition to the new business tax accounts, the cuts could threaten improvements to taxpayer service, such as the new taxpayer assistance centers that the IRS has been opening around the country, and to the IRS's aging technology.

"The business tax account will allow businesses to check their tax payment history, make payments, view notices, authorize powers of attorney and conduct other business with the IRS," said Werfel during a press conference, as reported by Accounting Today. "The first phase of this account will allow unincorporated sole proprietors who have an active Employer Identification Number to set up a business tax account where they can view their business profile and manage authorized users. Future improvements will add more features to this account." 

One tax professional found the initial version of the business tax accounts to be useful, but limited.

The problem with the account now is that it's limited to sole proprietors, so it's very limited in scope," said Bob Lickwar, a partner at UHY who is managing director of the firm's Farmington, Conn. Office, in an interview with Accounting Today. "The business account is a really good idea. It's going to allow you to make sure that your name and address and EIN [Employer Identification Number] information are correct. But more importantly than that, it's going to allow you to check the status of your various returns. For sole proprietors, it's pretty limited right now to 941s and maybe some excise tax returns, but I think once this gets up and running like the individual accounts, this is a great idea."

Lickwar found the accounts to be potentially useful for business clients. He said he would like to see the IRS add more functionality to the accounts.

"I think they'll add these over time," he said. "Once they add partnerships and S corps and C corps—this is more in the experimentation process for them right now—I think it will be a pretty quick turnaround where they're able to upload the same type of information, including things like income reports, and more importantly, account transcripts, which will show prior balances due and payments posted for the current year in the form of estimated taxes. I think all of that will be added over time."

Lickwar also said that the IRS’s improvements in its online Tax Pro Accounts, which it introduced in 2021, are useful as well.

"I think the Tax Pro Accounts are really good because you can make sure, for example, that your CAF number is still up and running," he said. "You can look at powers of attorney and information requests. I think the Tax Pro Account is a really good idea for practitioners. It doesn't hurt to set it up. It allows you access to some more information. But that's got to work, in my opinion, in tandem with the client setting up an account as well where you can share the information.”

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