The IRS released its Strategic Operating Plan for the Inflation Reduction Act in April 2023. This plan outlines how the IRS plans to utilize the $80 billion in funding from the IRA for the fiscal years 2023 to 2031.
The Plan outlines five objectives that will be accomplished through various initiatives and projects described in the Plan:
- Enhancing services to assist taxpayers in meeting their obligations and receiving eligible tax incentives.
- Promptly resolving taxpayer issues as they arise.
- Prioritizing enforcement efforts on taxpayers with complex tax filings and high-dollar noncompliance to address the tax gap.
- Implementing advanced technology, data, and analytics to operate more efficiently.
- Attracting, retaining, and empowering a diverse and highly-skilled workforce to foster a results-oriented culture for taxpayers.
Recently, on April 19, 2023, IRS Commissioner Danny Werfel testified before the Senate Finance Committee regarding the filing season, the President’s proposed budget for the IRS, and the Plan. Commissioner Werfel also plans to testify on these topics before the House Ways & Means Committee. During his Senate testimony, Commissioner Werfel announced the establishment of an IRS Transformation and Strategy Office that will be responsible for implementing the Plan. He committed to monitoring the progress of the detailed initiatives and projects outlined in the Plan and providing regular updates to Congress. Commissioner Werfel reiterated Treasury Secretary Yellen’s previous assurance that audit rates for small businesses and individuals earning less than USD 400,000 per year will not increase beyond historic levels. He clarified that the term “historic levels” refers to the audit rates for these groups of taxpayers in FY 2018. He pointed out that audit rates were lower in FY 2018 due to reduced staffing compared to previous years when the IRS had more personnel. He suggested that the reference point for “historic” audit levels may be adjusted in the future. While the majority of the additional funding allocated by the IRA is designated for enforcement purposes, the Plan emphasizes improvements in customer service (primarily targeting individuals) and technology upgrades. Additionally, the Plan highlights the hiring of additional staff in the IRS Office of Chief Counsel and Treasury’s Office of Tax Policy to increase the publication of guidance, both formal (such as regulations) and informal.
