How Increased IRS Funding Will Affect Middle-Low-Income Americans in 2022

How Increased IRS Funding Will Affect Middle The Inflation Reduction Act provided the Internal Revenue Service with funding of $80 billion, which ignited a firestorm of speculation that the tax agency would ramp up audits and even begin sending armed agents into the field to collect tax bills. The Inflation Reduction Act was signed into law on August 2, 2011.

However, those who specialise in taxes claim that the allegations circulating about the law on the internet range from inaccurate to completely false. In point of fact, there are others who maintain that a monetary injection into the IRS would be to the advantage of taxpayers with lower and middle-incomes who have been subjected to lengthy delays in the processing of their paper returns and communications.

Miri Forster, national leader of the tax controversy group at accounting firm Eisner Advisory Group LLC, believes that this will help taxpayers have a better experience overall with customer service. “It will assist people have a better customer service experience,” she adds.

Although not everyone is convinced that there won’t be an increase in audits for middle-income families, most experts agree that the IRS was overdue for a funding increase and that this isn’t all bad news for taxpayers. However, there are some people who are convinced that there will be an increase in audits for middle-income families.

An Underfunded Agency. How Increased IRS Funding Will Affect Middle

Those who work in the tax sector believe that the allocation of $80 billion to the IRS is long overdue, despite the fact that some members of the general public may have been taken aback by the news.

According to Bill Smith, who is the national director of tax technical services at CBIZ MHM’s National Tax Office, “They have been gradually disintegrating over the course of many years.” He points out that the current personnel numbers at the IRS are fewer than they were in 2010, which has led to protracted delays in the processing of paperwork. Smith complains that the pace of correspondence is “ridiculously sluggish.”

How Increased IRS Funding Will Affect Middle According to the Taxpayer Advocate Service, an independent body inside the IRS, the number of full-time workers for the Internal Revenue Service (IRS) was 73,554 in the fiscal year 2019; this is a 22% decline from the agency’s personnel level in the fiscal year 2010. During that period of time, the budget for the organisation was decreased by 20.4% after taking into account the effects of inflation.

According to Forster, “The Internal Revenue Service has been underfunded for years, and many of its personnel are getting close to retirement age.”

On the other hand, not everyone views the injection of cash as just a means to restore employment and funding levels to where they were before the recession. According to Scott Curley, CEO and partner of FinishLine Tax Solutions, the decision to boost funding for the Internal Revenue Service (IRS) is at least partially connected to growing inflation rates as well as increased spending by the government on aid supplied during the epidemic.

According to Curley, “it put us in a precarious position.” According to him, the government had two options on how to pay for the costs associated with the pandemic: “Do we want to raise taxes even more, or do we want to go after the money that is already owing to us?” Curley feels that the latter was the answer given by the government, given that extra funding has been approved for the IRS.

How IRS Funding Will Be Used

The additional $80 billion in money that was allocated to the Internal Revenue Service as part of the Inflation Reduction Act was divided into the following four categories:

Enforcement: $45.6 billion

Operations support: $25.3 billion

The cost of modernising the business system was $4.8 billion.

Services to taxpayers cost $3.2 billion

This funding is available for distribution over a period of 10 years, from the current fiscal year to the following one in 2031.

According to Smith, “we do not know how they are going to spend the money at this time.” He goes on to say that some people believe a new IRS Commissioner will be named this autumn, and he believes that any choices on how the money will be spent would most likely have to wait until after the appointment has been made.

How Increased IRS Funding Will Affect Middle The specialists in the tax industry have high hopes that at least part of the money will be allocated to improving response times and modernising IRS computer systems. The Internal Revenue Service (IRS) reports that as of September 2022, it has not yet processed 7.2 million individual tax returns. This number includes filings for the year 2021 as well as returns for preceding years that were filed late.

Smith claims that anything that is physically filed away will be thrown into a “basket of Armageddon.” However, a greater personnel isn’t the only thing that’s required to process returns and get the agency up to speed on its workload. Smith claims that the company’s information technology (IT) systems are horribly out of date.

How Increased IRS Funding Will Affect Middle
How Increased IRS Funding Will Affect Middle

Many people are curious about whether or not the fact that more than half of the extra cash is designated for enforcement would result in an increased number of audits. Curley provides a succinct response, stating that “the simple answer is it’s an absolute certainty.”

The question that has to be answered, however, is which parties will be subject to such audits. But Curley argues that the bill doesn’t make any changes to the fundamental rules that guide an automatic system that flags returns for a potential audit. The IRS asserts that it will not be targeting low- to middle-income families, but Curley says that the law doesn’t modify those criteria. According to Curley, this may imply that some of those audits, in spite of the IRS’s promises, may be geared towards middle-income households. How Increased IRS Funding Will Affect Middle How Increased IRS Funding Will Affect Middle How Increased IRS Funding Will Affect Middle How Increased IRS Funding Will Affect Middle How Increased IRS Funding Will Affect Middle How Increased IRS Funding Will Affect Middle How Increased IRS Funding Will Affect Middle

Hiring 87,000 IRS Agents Is Unlikely

The assertion that the Internal Revenue Service (IRS) would be recruiting 87,000 enforcement agents is adding fuel to the fire of worry around audits. According to Curley, “the common perception is that the Internal Revenue Service would double in size, but that’s a bit inaccurate.”

The number 87,000 comes from a research that was published in 2021 by the Department of Treasury. In that analysis, it was anticipated that increased income from the IRS might finance 86,852 new staff by the year 2031. Smith draws attention to the fact that the study was only a single proposal for how the money may be spent and that the personnel in question could not even be law enforcement officers. This number may include persons who are filling tasks such as those involving computer programming or providing customer service.

The Internal Revenue Service (IRS) has emphasised on many occasions that any increase in enforcement actions will focus on those earning higher wages. According to the research for 2021, “(A)udit rates will not climb relative to prior years for people earning less than $400,000 in actual income.” [Citation needed] How Increased IRS Funding Will Affect Middle How Increased IRS Funding Will Affect Middle How Increased IRS Funding Will Affect Middle

According to Forster, she believes that in the years to come, not only will top earners be subject to an enhanced level of scrutiny, but also overseas returns and returns from partnerships.

The Nutshell for Taxpayers with Lower and Middle-Range Incomes

It is not yet clear how exactly the extra money for the IRS would affect families with lower and moderate incomes, although some experts expect that the overall effect will be beneficial to individuals who are in lower tax categories. How Increased IRS Funding Will Affect Middle How Increased IRS Funding Will Affect Middle How Increased IRS Funding Will Affect Middle

According to Forster, the financing for the IRS will include a plan to fund a free electronic filing system. It’s possible that this will be to the advantage of all taxpayers who do their own tax returns.

An increased workforce can also imply a more responsive Internal Revenue Service. According to the Taxpayer Advocate Service, the Internal Revenue Service (IRS) received 100.5 million calls during the Fiscal Year 2020 but was only able to answer 24% of those calls. The group contends that people who require customer care from the IRS will have a more positive experience if more money is allocated to the agency.

Despite this, there are some people who believe not all of the changes will be for the better. Curley is concerned that some families from the middle class might wind up becoming the subject of enforcement action. “Those in the solid centre will be the ones who are affected the most,” according to his forecast.

On the other hand, Smith is of the opinion that taxpayers with lower and moderate incomes have no need to be concerned. According to him, the audit rates for taxpayers in that income category are exceedingly low. “The audit rates are incredibly low.” “(They are) so minuscule that they cannot even be seen.” How Increased IRS Funding Will Affect Middle How Increased IRS Funding Will Affect Middle

The experts predict that the Internal Revenue Service will conclude its expenditure plan by the beginning of 2023.

Leave a Comment