Treasury Secretary Janet Yellen addressed a group of Internal Revenue Service employees Tuesday as the agency fends off budget cuts pushed by House Republicans.
Last week, the House passed a $14.3 billion aid package for Israel funded by cuts to the IRS's enforcement budget, further reducing the $80 billion provided under last year's Inflation Reduction Act (
However, it's already been rejected by Senate Majority Leader Charles Schumer, D-New York, and President Biden has threatened to veto it. Yellen wants to make sure the proposal doesn't go any further, though, as she pointed to progress by the IRS since receiving the extra funding under the Inflation Reduction Act.
"The current proposals to cut funding for the IRS make this an especially crucial time to talk about the importance of this work," said Yellen. "Playing politics with IRS funding is unacceptable. Cutting it would be damaging and irresponsible."
She and other IRS officials pointed out that the IRS has already met the first goal of its Paperless Processing Initiative three months ahead of schedule. Taxpayers can now digitally submit all their correspondence and responses to notices. In February the IRS unveiled the ability to respond to nine notices through the Document Upload Tool. Prior to this past filing season, taxpayers could only submit the documents through the mail. The IRS has now achieved the ability to digitally respond to all notices in eight months. As of Oct. 27, the IRS has received over 35,000 responses to notices through the online tool. As a result of achieving this goal, the IRS estimates over 94% of individual taxpayers will no longer need to send mail to the IRS.
The IRS expects to meet the second goal of the Paperless Processing Initiative by the beginning of next filing season by providing the option for taxpayers to electronically file 20 more tax forms, enabling up to 4 million additional tax documents to be digitally filed every year. That includes amendments to Forms 940, 941, 941-SS and 941(PR), which are some of the most common forms businesses file when amending returns.
"Today, I'm announcing another key milestone to make the IRS even less reliant on paper processing," said Yellen. "By the start of the filing season, taxpayers will be able to electronically file 20 additional tax forms, including some of the most common forms for businesses."
Next filing season, taxpayers will also see new updates to the Where's My Refund tool. The updates will enable taxpayers to view more detailed refund status messages in plain language. The updates will enable Where's My Refund to work better on mobile devices and provide more information to taxpayers. Instead of seeing a generic message saying their returns are still being processed and to check back later, the new and improved Where's My Refund tool will let taxpayers see clearer and more detailed updates, including whether the IRS needs them to respond to a letter asking for more information. The updates will also reduce the need for taxpayers to call the IRS to get answers to their basic questions.
Yellen said the IRS would also improve its phone service. "By phone, we will again commit to an 85% level of service during the filing season, meaning the vast majority of callers will be connected to live assistors and get support," she said. "We'll also commit to an average call wait time of five minutes or less, and nearly all callers will be able to take advantage of a callback option in the rare situations in which the wait time is much longer. This is a world away from the 2022 filing season, when callers faced an average 10 to 15% level of service, an average phone wait time of nearly 30 minutes, and a much more limited callback option."
The IRS will offer a callback option to 95% of eligible taxpayers seeking telephone assistance at the start of the call if the projected wait time is longer than 15 minutes. The IRS also plans to provide better in-person service. It has already opened or reopened 50 of its Taxpayer Assistance Centers using funding from the Inflation Reduction Act. Next tax season, it intends to increase the hours available at Taxpayer Assistance Centers by more than 8,500 hours.
"This filing season, Taxpayer Assistance Centers across the country will collectively offer over 8,000 more hours of in-person assistance than they did last filing season," said Yellen. "We'll also expand efforts to reach taxpayers in hard-to-reach areas who otherwise have difficulty accessing in-person assistance. To do this, we've added a new form of assistance: temporary pop-up centers, such as in Ciales, Puerto Rico and Gallup, New Mexico."
She noted that the IRS will also launch a limited-scope Direct File pilot program to allow taxpayers to file their taxes online for free with the IRS. "Starting this filing season, eligible taxpayers in 13 states will be able to electronically file their federal tax return directly with the IRS — for free," said Yellen. "The pilot is an opportunity to learn: We'll test the taxpayer experience, technology, customer support, state integration, and fraud prevention and then apply these insights as we consider scaling to more users."
The initiatives will be funded in part by increased enforcement by the IRS as it steps up audits of large partnerships and corporations and high-income individuals, while leveraging artificial intelligence and hiring more tax experts who can follow the money trail.
"The ambitious targets we've set and will keep setting are achievable but by no means easy," said Yellen. "And while we'll all benefit, it is IRS staff who will do the hard work to get us there. So, alongside investing in customer service and new systems, we're continuing to invest in our greatest asset: the IRS workforce. We're hiring even more employees focused on taxpayer services. We're also strengthening enforcement, with a focus on high earners. Our fair enforcement initiative is about both fundamental fairness and raising much-needed revenue. And we are making progress. Thanks to strengthened enforcement, the IRS collected $160 million in just a few months from millionaires who had not paid their outstanding debt. It has announced new initiatives to use artificial intelligence to uncover tax evasion by large corporations and complex partnerships. And for this filing season, we'll drive even more progress by hiring employees with specialized expertise to focus on audits for high-wealth filers, large corporations and complex partnerships."
The Biden administration hopes to preserve the extra funding, despite the pushback from Republicans.
"The most destructive thing that's happening here at the agency in the political crosswinds is frankly the uncertainty," said Mark Everson, a former IRS commissioner who is now a vice chairman at Alliantgroup, a tax consulting firm. "It's very hard for the agency to plan and execute against those plans if it doesn't have the confidence that the funding will be there. It's unfortunate that happened, but there are two sides to this coin. The Republicans have been condemning the IRS and its enforcement mission for years. The Biden administration has held the agency closer than any presidential administration in the last 50 years, and they've done that at considerable political peril, so it's now much more controversial."
He sees encouraging signs in the plans announced by Yellen. "Getting call waiting time down to under five minutes, that's good," said Everson. "If there are certain subsystems where they say you're going to get an automatic callback if you've got to wait more than 15 minutes, that's progress too. What they're saying about Where's My Refund, those are good changes as well. This isn't only targeted at the electronic side. They're putting more resources into the in-person visitation. That makes sense."
However, he is worried about the enforcement funds being disproportional to the amount spent on improving taxpayer service and technology, as well as the possibility of hiring contractors to supplement the workforce like the one who recently pleaded guilty to leaking the tax returns of billionaires to news organizations (
"They've hired thousands of people," said Everson. "Many hundreds of those people were new for the last filing season. They're going to get very significant operational improvements this go-round because a lot of people have been there for a year. And some of the good ones will have moved up into supervision and they'll be running little units and things will be more effective. And some of the people who didn't work out or didn't like the work or couldn't quite get with the program, they're gone, so it ought to be a lot smoother operationally. If there's any one thing that's important, you're going to have a lot more operational effectiveness. That would be my hope and my expectation."
