The Internal Revenue Service released an
The latest
- Objective 1. Dramatically improve services to help taxpayers meet their obligations and receive the tax incentives for which they are eligible.
- Objective 2. Quickly resolve taxpayer issues when they arise.
- Objective 3. Focus expanded enforcement on taxpayers with complex tax filings and high-dollar noncompliance to address the tax gap.
- Objective 4. Deliver cutting-edge technology, data and analytics to operate more effectively.
- Objective 5. Attract, retain and empower a highly skilled, diverse workforce and develop a culture that is better equipped to deliver results for taxpayers.
"These efforts will continue to accelerate as we get deeper into the strategic operating plan and as we continue the work made possible by Inflation Reduction Act funding," said IRS Commissioner Danny Werfel during a press conference Thursday. "By many measures we have seen an incredible amount of progress since we received this funding less than two years ago."
He noted that IRS employees have dramatically improved service over the past two years, especially compared to the initial years of the pandemic. "Across the IRS, we've made fundamental changes that have improved taxpayer services, brought new fairness to compliance efforts, launched important upgrades to our technology, and made improvements that have made the IRS a more attractive place for people to work," said Werfel. "We are making a difference to taxpayers and the nation."
Accounting Today asked Werfel about the improvements planned for tax professionals in the Practitioner Priority Service and other areas at the IRS.
"We have made a lot of progress, but there's a lot more work to do," Werfel responded. "For example, we had a tremendously positive performance on our 1040 line, our 1-800 line for 1040 filers, one of the best years we've ever had in terms of nearly a 90% level of service and three-minute wait times. More than 85% of every phone call the IRS receives goes through that line. But in the remaining 15%, there's work to do to improve our performance on those phone lines, and one of them is the tax professional line. We have put in a set of initiatives that are in the updated SOP. A lot of those initiatives, including to improve our performance on the phone line, involve building out a better taxpayer [and] professional online account. Our vision for modernizing the IRS is that everyone who needs to work with the IRS can do so completely digitally if they choose. We want to get there. That means that we have to get our Individual Online Account, our Business Online Account and our Tax Professional Online Account to have all the functionality. That means that they don't need to call us or go to a walk-in center if they don't want to. They can do it all digitally. And so you'll see in the report a variety of different expansion of capabilities on our Tax Professional Online Account. What that will do is it means that people will need to call us less, so that will help reduce demand on the phone line and help us perform. But also we will have happier tax pros, because they'll have technology at their fingertips that allows them to be more efficient in getting their job done."
The report notes that the IRS's 2024 priority efforts include expanding the capabilities of the Tax Professional Online Account so individual tax professionals can initiate Power of Attorney and Tax Information Authorization requests for business clients; view the balance due for authorized clients; view payment activity pending, scheduled and post payment; and make payments on behalf of individual clients.
The 2025 priority efforts for the Tax Pro Online Account will continue to expand such capabilities, by linking to a business Centralized Authorization File, enabling tax professionals to access their clients' data and take action on behalf of a client; initiate a POA or TIA for individual clients; enable authorized tax professionals to make payments on behalf of a sole proprietor; enable authorized tax professionals to make and modify payments on behalf of individual clients; provide status updates (such as changes in refund status); and make payments and set up payment plans on behalf of their clients.
The report also points out that in January 2024, the IRS launched a new annual Tax Professional Awareness initiative to educate tax professionals on refundable credit eligibility requirements and inform them of their due diligence requirements to help taxpayers receive credits.
Key areas of focus for the IRS overall through 2025 include:
- Enhancing live assistance through improved efficiency in call centers, reduced backlog of paper returns and continued expanded staffing levels at Taxpayer Assistance Centers and "Pop-up Live Assistance Centers" in rural and other areas, while working to ensure taxpayers are aware of all available credits and benefits.
- Expanding online services by expanding the features available in online accounts, including digital copies of notices, status updates, secure two-way messaging and expanded payment options.
- Accelerating digitalization by providing up to 150 non-tax forms in digital mobile-friendly formats in addition to the 20 delivered in fiscal year 2024 as well as scanning at the point of entry virtually all paper-filed tax and information returns.
- Simplifying notices by redesigning up to 200 notices, capturing 90% of all notice volume for individual taxpayers and initiating business process changes necessary to flexibly generate notices and reduce taxpayer burden.
- Disrupting tax scams and schemes by coordinating with partners to identify scams and victims and improving victim assistance.
- Modernizing foundational technology and aged programming from the point of intake of tax returns and information systems. Data security will be integrated throughout to protect the integrity of the tax system and taxpayers.
- Modernizing how the IRS attracts, retains, develops and empowers employees, focusing on efforts to ensure they have the tools, training and culture they need to perform at their best.
- Improving IRS employee tools by developing and integrating high priority software tools into operations to help taxpayers and improve service.
- Ensuring fairness in enforcement through hiring and increased training in staffing areas such as those dedicated to high-income earners and large and complex partnerships.
The IRS also plans to increase its audits of the wealthiest taxpayers, large corporations and large, complex partnerships by sizable percentages for tax year 2026:
- The plan highlights the IRS will nearly triple audit rates on large corporations with assets over $250 million to 22.6% in tax year 2026, up from 8.8% in tax year 2019.
- The IRS will increase audit rates by nearly ten-fold on large, complex partnerships with assets over $10 million, going from 0.1% in 2019 to 1% in tax year 2026.
- The IRS will increase audit rates by more than 50% on wealthy individual taxpayers with total positive income over $10 million, with audit rates going from an 11% coverage rate in 2019 to 16.5% in tax year 2026.
- At the same time, the IRS is continuing to emphasize the agency will not increase audit rates for small businesses and taxpayers earning under $400,000, and those rates remain at historically low levels.
Werfel noted that the Strategic Operating Plan update also highlighted ongoing funding challenges. While the Inflation Reduction Act funding provides tens of billions of dollars, years of under-funding have created unique challenges for the agency.
In addition, given current funding structures, the Strategic Operating Plan noted that the agency anticipates Business System Modernization funding provided under IRA — which are crucial for technology improvements — will run out by fiscal year 2026, so the current levels of taxpayer service won't be able to remain supported through fiscal year 2026. That means the nearly 88% level of service delivered for taxpayers this filing season on the IRS's main phone lines could drop back to 30% levels in 2026 — meaning seven out of 10 taxpayers wouldn't be able to reach an IRS assistor when calling.
"The IRS will continue focusing on making improvements and efficient use of funding," Werfel said. "We highlight accomplishments rather than taking a victory lap because more work remains. But to stress the importance of continuing this momentum, the IRS will continue working to make a difference for the nation's taxpayers. At the same time, it's critical that the IRS has stable, secure funding to allow technology modernization and taxpayer service improvements to continue into the future."
However, the IRS also faces the threat of budget cuts. The $80 billion that the IRS was supposed to receive over 10 years under the Inflation Reduction Act of 2022 has already been reduced by approximately $20 billion as part of the deal last year to raise the debt ceiling and avoid a default.
The Biden administration's fiscal year 2025 budget proposal proposes to restore and maintain the full IRA investment in the IRS through 2034 and avoid funding cliffs that would dramatically degrade IRS work ability in many different areas, including taxpayer services beginning in 2026 as well as technology modernization.
To address these funding cliffs, the administration's budget plan includes a mandatory proposal that would extend IRA funding through FY 2034. This proposal would provide $104 billion to the IRS over the 10-year budget window and is estimated to generate at least an extra $341 billion in revenue.
The Treasury Department pointed to the uses that the IRS has already made with the extra funding.
"During the 2024 filing season, the IRS answered more than 1 million more calls than the 2023 filing season while maintaining an average wait time of just over three minutes," said Laurel Blatchford, the Treasury Department's chief implementation officer for the Inflation Reduction Act, during the press conference. "The new callback option made available for the 2024 filing season saved taxpayers an estimated 1.5 million hours of sitting on hold. The IRS Taxpayer Assistance Centers serve more than 780,000 taxpayers in person, an increase of more than 37% compared to 2023. The IRS launched the Simple Notice initiative to review, redesign and deploy hundreds of notices so taxpayers could better understand the actions they needed to take with an immediate focus on the most common notices that individual taxpayers receive. Thirty-one notices were deployed for the 2024 filing season."
She noted that the IRS also enhanced many of its online tools, such as Where's My Refund, Individual and Tax Pro Online Accounts, while also launching new online tools including the Business Tax Account for individual partners of partnerships, individual shareholders of S corporations and sole proprietors with an employer identification number.
The IRS in August 2023 launched the Paperless Processing Initiative, which allowed taxpayers to go paperless by the 2024 filing season and e-file over a dozen additional forms.
In addition, the IRS launched the Direct File Pilot Program to allow eligible taxpayers in 12 states with simple returns to file for free, directly with the IRS. The IRS exceeded its goal for the pilot program, with more than 140,000 taxpayers submitting accepted returns.
Blathcford also pointed to some of the ways that the IRS strengthened individual enforcement against complex partnerships, large corporations and wealthy individuals.
"The IRS is using IRA resources to strengthen enforcement and pursue complex partnerships, large corporations and wealthy individuals," she said. "The IRS has launched new initiatives in each of these areas with significant success so far. They have launched new initiatives to crack down on abuse of corporate jets for personal travel, and 125,000 wealthy individuals who have not filed tax returns for years. Using artificial intelligence and advanced analytics to help select complex partnerships for audits, the IRS has launched audits at 76 of the largest partnerships with average assets of $10 billion that represent a cross-section of industries, including hedge funds, real estate investment partnerships, publicly traded partnerships, large law firms and other industries. The IRS also is launching audits of the 60 largest corporate taxpayers with average assets of $24 billion. While the IRS has made significant progress over the last year toward delivering transformational change, there's so much work to be done in the coming years."
