IRS chief predicts a decline in performance if budget and personnel are reduced
The Internal Revenue Service (IRS) has embarked on the 2024 tax filing season with renewed efforts to improve its capabilities and performance, thanks to funds received from the Inflation Reduction Act (IRA). However, the future of these improvements and the IRS modernization plan itself hangs in the balance.
If congressional support and funding for the IRS modernization plan are not retained, much of Commissioner Danny Werfel's progress could be undone. The plan, aimed at improving customer service, reducing backlogs, and increasing enforcement, faces an uncertain future due to funding issues.
Commissioner Werfel and his team are working diligently to explain the implications of budget constraints to Congress and new Treasury leadership. They are also engaging with the incoming administration and lawmakers to convince them not to walk back the progress made so far.
The IRS has seen a significant increase in its workforce, eclipsing 100,000 employees in fiscal 2024, according to the National Taxpayer Advocate. This growth was seen from a starting point of 80,000 employees at the beginning of the Biden administration.
One of the key initiatives under the modernization plan is the doubling of the number of states where taxpayers can file directly through the agency. Additionally, Commissioner Werfel has announced plans to increase taxpayer assistance center hours, rural outreach, and tax counseling.
However, if the funding for the IRS modernization plan disappears, the workforce will contract while the level of work will remain the same. This could lead to slower processing delays and potential backlogs, returning the IRS to long wait times and limited enforcement.
The nominated IRS commissioner by President-elect Trump, former Rep. Billy Long, R-Mo., has been announced. Despite Commissioner Werfel's term not expiring until 2027, President-elect Trump has chosen to nominate him to take over the IRS. Commissioner Werfel has declined to state whether he will step aside or force Trump to fire him, saying only that he is "laser focused" on the tax filing season.
The remaining $20 billion of IRA funds is currently in limbo due to fiscal 2025 appropriations. If these funds are not retained, much of the work overseen by Commissioner Danny Werfel would be undone. Even if the status quo remains, the IRS will have to make difficult workforce decisions in the next year or two as IRA funds dwindle.
The IRS modernization plan is a crucial step towards improving the efficiency and effectiveness of the IRS. Its success hinges on the continued support and funding from Congress and the new administration. Only time will tell if the IRS will continue to make strides in service delivery or slip back into the challenges of the past.
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