On April 6, the Treasury Department and IRS released a Strategic Operating Plan detailing how new funding and thousands of new hires will be applied, saying it will provide taxpayers with “world-class customer service and reduce the deficit by hundreds of billions [of dollars].”
The resources — included in the Inflation Reduction Act — will also improve enforcement among wealthy individuals and large corporations the IRS claims are "not paying the taxes they owe.”
“Thanks to Inflation Reduction Act resources, the IRS is already delivering significantly improved customer service this filing season,” Treasury Secretary Janet Yellen said in a statement. “The Strategic Operating Plan shows how the IRS will continue this transformation by providing world-class service, upgrading decades-old technology, and reducing the tax gap by ensuring high earners play by the same rules as working and middle-class families.”
The Strategic Operating Plan’s five objectives include the following:
1.Dramatically improve services to help taxpayers meet their obligations and receive the tax incentives for which they are eligible.
2. Quickly resolve taxpayer issues when they arise.
3. Focus expanded enforcement on taxpayers with complex tax filings and high-dollar noncompliance to address the tax gap.
4. Deliver cutting-edge technology, data, and analytics to operate more effectively.
5. Attract, retain, and empower a highly-skilled, diverse workforce and develop a culture that is better equipped to deliver results for taxpayers.
Yellen emphasized that the plan complies with her directive that IRA resources not be used to raise audit rates for small businesses and households making less than $400,000 annually.
Customer Service
The IRS said it will help taxpayers “get it right” by interacting “with the IRS in the ways that work best for them on the phone, in-person, and online.”
In the first five years of the 10-year plan, taxpayers can file all documents, respond to all notices online, and securely access and download their data and account history.
"For the first time, the IRS will also help taxpayers identify potential mistakes before filing, quickly fix errors that delay their refunds, and more easily claim the credits and deductions they are eligible for," the Treasury Department said.
Improved Technology
The IRS will also eliminate paper backlogs that have delayed taxpayer refunds by digitizing forms and returns when received and transitioning to fully digital correspondence processes. While the IRS will preserve paper filing options, scanning and digitizing all returns at the outset “will allow IRS to increase efficiency and improve service.”
More Enforcement
Due to what it says is a lack of resources and loss of top talent, audits of the wealthy and large corporations have plummeted over the last decade, and the amount of taxes evaded by the top 1% has exploded to $160 billion per year. According to the department, audit rates for millionaires fell by 77%, audit rates for large corporations fell by 44%, and audit rates for partnerships fell by 80% between 2010 and 2017.
It, therefore, claims it takes up to 50 times longer for top talent to audit wealthy individuals and their related entities than to complete simple audits — up to 250 hours rather than five hours on average. Corporate audits similarly average hundreds of hours over two to four years.
The IRS said it would hire experienced accountants and attorneys and utilize improved data and analytics to ramp up enforcement at the top and ensure wealthy individuals, large corporations, and complex partnerships pay the taxes they owe.
Improved data and analytics will allow the IRS to better identify potential evasion within the complex structures used by high-income and high-wealth individuals and large corporations, ensuring top IRS talent focus their time on audits most likely to reveal significant evasion.
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