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TIGTA: Most of IRS’s Initial Inflation Reduction Act Spending Went to Taxpayer Services

Ruth Singleton
Published Date:
Oct 12, 2023

The Treasury Inspector General for Tax Administration (TIGTA) has issued a report finding that the majority of the IRS's expenditures from Inflation Reduction Act funding—from the passage of that legislation in August 2022 through June 30, 2023—related to "IRS employees’ pay and benefits and contractors’ support for advisory and assistance services." The IRS expended approximately $1.95 billion or 2.5 percent of its $78 billion in IRA funding during that period, and roughly $561 million of that expenditure went to taxpayer services.

In its introduction to the report, TIGTA provided some historical background: "In addition to its Fiscal Year 2023 annual appropriation of $12.3 billion, the IRS received approximately $79.4 billion in supplemental funding when [President Joe Biden] signed the Inflation Reduction Act of 2022 (IRA) into law in August 2022. Approximately $1.4 billion in IRA funding was later rescinded by Congress reducing the available IRA supplemental funding to approximately $78 billion. This supplemental funding is available through September 30, 2031."

TIGTA said that it initiated this review "to provide periodic reporting on the IRS’s use and accounting for expenditures using IRA funds." It added, "This is our first reporting on the IRS’s spending of its IRA funding. ... Going forward, TIGTA plans to issue this type of report quarterly, which will provide quarterly and cumulative reporting on the IRS’s use of IRA funding to implement its Strategic Operating Plan."

Commenting on the funding's impact on tax administration, TIGTA said, "The IRS’s transformation efforts that will be achieved through IRA supplemental funding will help improve taxpayer service, update IRS computer systems, and increase compliance and enforcement actions against high income taxpayers and large corporations."

A chart in the report shows the IRS’s budget authority through fiscal year 2031, comparing the IRS's projected funding amounts before and after passage of the Inflation Reduction Act in four areas: enforcement, operations support, taxpayer services and business systems modernization. For enforcement, the legislation raised the funding amount from $66 billion to $111.7 billion, a 69 percent increase. For operations support, the legislation raised the funding amount from 47.6 billion to 72.9 billion, a 53 percent increase. For taxpayer services, the legislation raised the funding amount from $33.6 billion to $36.8 billion, a 9 percent increase. And for business systems modernization, the legislation raised the funding amount from $3.1 billion to $7.8 billion, a 153 percent increase.

Because the report was prepared to provide information only, no recommendations to the IRS were made.

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