Unless you’ve been on a much-deserved vacation or living under a rock, you know about the recent IRS budget increase. An $80 billion addition to supersize the IRS was recently announced. Its overarching purpose–is to help revive the painfully dated organization. The IRS will be awarded $80 billion in additional funding over the next decade as part of the Inflation Reduction Act. What exactly it will be used for is unclear, but the focus seems to be expanding the IRS workforce and reducing the tax gap. But what can we really expect from this massive addition to this archaic agency?
More Money, More Problems?
Does The IRS Expansion Solve Its Most Pressing Problems?
Since 2010, the IRS’s budget has fallen by 20% , resulting in the loss of almost a quarter of its workforce. You could argue that this is the origination of the massive IRS backlog, but it has had more implications than the tax backlog. This consistent budget reduction over the years has also ensured that the entire agency has remained stagnant and dated. Its website is a nightmare and wait times are so infamously long that there are businesses built on cutting down the long hold IRS hold times.
The accounting industry, in general, has been under pressure for years, and the IRS is no exception. Between a dwindling workforce, ever-growing demand, and dated operations there’s an entire array of challenges that still need to be addressed. What are the most significant challenges the IRS is facing?
First and foremost is the issue of employee turnover. The IRS has one of the highest turnover rates of all government agencies at over 20%. And, over the course of the next six years, 63% of IRS employees will be eligible to retire. Ideally, a portion of the new budget would be allocated to hiring new employees to remove the pressure on existing ones and to increase employee salaries. But that’s just one small piece of the puzzle…
New Number, Who's This?
How The IRS Budget Increase Affects Accountants & Taxpayers
1995 called and it wants its website back. From a taxpayer perspective, one of the most frustrating parts of the IRS is the unhelpful and difficult-to-use website. It’s hard to even know where to look for their answers, much less actually find solutions. And, with such complex tax codes, the lack of assistance from the IRS leaves taxpayers frustrated and confused. But, more often than not, taxpayers deal with the IRS a few times a year, at most. How will this budget increase affect accountants that deal with them every day?
It’s no secret that IRS creates challenges for accountants. “Dealings with the IRS” were listed as the number one challenge small firms (ten employees or less) face. It was also listed in the top three concerns for larger firms. Accounting professionals are already overwhelmed. Between navigating a complicated tax code and increasing demand, they don’t have the time to battle it out with a government agency too.
Will The Expanded IRS Budget Help Accountants?
The first step forward for the IRS has already been met with pushback. They announced that they would be hiring 87,000 new IRS agents. But is this an army to audit the middle class or just an attempt to clear out their backlog of 21 million tax returns? More than likely, this hiring surge is aimed primarily at closing the tax gap.
You can take a look at the exact breakdown of the budget here, but over half of it has been designated for “enforcement activities.” This means a lot more audits and stricter tax compliance oversight, which will undoubtedly put more pressure on accountants.
Alternatively, in a move to focus inward, it’s estimated that the IRS will use 25.3 billion for operations support. This includes action items like information technology development, security improvement, and general “enhancement.” Maybe this means we’ll be treated to a fully functioning and user-friendly website. We sure can dream…
On an equally optimistic note, the IRS has also allocated $4.8 billion to “business systems modernization.” The most important aspect of this is an investment in callback technology and an effort to offer more personalized customer service. This, in turn, should drastically reduce wait times, and get accountants connected with the right people, faster and more efficiently. In the long run, this budget increase should help alleviate some of the IRS’ most pressing issues. But whether it will offer long-term solutions, remains to be seen.
What Would Entreprenuerial Accountants Do?
We have a vague idea of what the IRS will be doing with the recent budget increase, but does this government agency know what the people want? We asked the Proactive Accountants Facebook group what they would do with the extra $80 billion dollars awarded to the IRS. Some answers were expected… others were a bit of a surprise. Take a look at some of our favorite answers to “What would you do with the IRS Budget Increase?
All in all, the budget increase should mark a positive step forward. But, you don’t need to wait on the IRS to get some support. We support entrepreneurial accountants as they step out on their own and build their dream accounting firms. You can’t rely on the IRS, but you can rely on us. Check our reviews here. And, if you’re ready to stop letting the IRS deadlines and demanding clients darken the future of your firm, schedule your free discovery call.