december2022january2023 - 13

FEATURE
THE IRS HAS about 80 billion reasons to be thankful this
holiday season. That's because President Biden signed
the Inflation Reduction Act into law on Aug. 16, which
includes a provision to allocate roughly $79.6 billion to the
tax agency over the next 10 years-what some observers
say is the largest amount of funding the IRS has received
from Congress that they can remember.
In a July 31 post on her blog,
" Don't Mess With Taxes, " (https://
tinyurl.com/2p8kj67h) tax expert Kay
Bell broke down how that money is
expected to be distributed to the IRS
over the next nine fiscal years:
* $4,750,700,000 for business systems
modernization;
* $3,181,500,000 for taxpayer services;
* $25,326,400,000 for operat ions
support; and
* $45,637,400,000 for enforcement.
The remainder of the funding
will go to the U.S. Tax Court, the
Treasury Inspector General for Tax
Administration, and the Treasury
Department's Office of Tax Policy.
Treasury Secretary Janet Yellen
asked the IRS in late August to
produce a six-month plan (https://
tinyurl.com/2s4kyk94) detailing
exactly how the new resources will
be deployed over the next decade.
" Treasury is going to be keeping
a close eye on it because the agency
has to succeed here, and we need
to see something in this plan that
instills confidence that the agency
in fact has a plan, that it's a reasonable
one, and that it's achievable.
Here's where we're going, here's how
we're getting there, and here are
some intermediate milestones. This
infusion of money is significant, and
I think the stakes are so high that
Treasury has to be involved, " Robert
Kerr, principal at Kerr Consulting,
said during an appearance on the
" This Week on Tax Notes Talk "
podcast on Sept. 13 (https://tinyurl.
com/yadjjmtt).
The problem is, we do not know
who is going to be leading the IRS
six months from now. Charles
Rettig's term as IRS commissioner
expired on Nov. 12, and the new
chief will have to jump right in and
figure out a plan for the windfall the
IRS will receive. Biden nominated
Daniel Werfel, a former acting
commissioner of the IRS during
the Obama administration and
the current global leader of the
Public Sector practice at Boston
Consulting Group, as the next IRS
commissioner but that is pending
confirmation by the Senate. Until
then, IRS Deputy Commissioner
Douglas O'Donnell will serve as
acting commissioner.
So, what is next for the IRS? It is
a question some tax experts tried
to answer on a variety of podcasts
recently along with trying to understand
what this increase in the IRS's
annual budget could mean for the
upcoming tax season.
HIRING TO FILL MANY
NEEDS
According to an August Bloomberg
report (https://tinyurl.com/u872mfys),
the IRS has lost more than 23,000
employees since 2010-to 80,000
at the height of tax season this
year-and it is estimated that the tax
agency is going to lose approximately
50,000 more in the next five years due
to retirement.
" We all know they're behind [on
hiring], and that's part of the cause
[for this funding], " Misty Erickson, a
tax specialist at the National Association
of Tax Professionals (NATP)
and a former auditor for the state
of Minnesota, said during an NATP
podcast on Sept. 1 (https://tinyurl.
com/2vza4uas). But those retiring
IRS employees are not what has made
national headlines. What has are
claims by some lawmakers that the
IRS will use the new federal funding
to hire 87,000 " agents " in an effort to
increase audits of the middle class-
both of which are not true, the IRS
has said. The IRS and Democrats have
attempted to reassure Americans that
the additional audit activity will affect
only those making $400,000 or more.
" Eighty-seven thousand agents
aren't going to show up on the IRS's
doorstep the day the Inflation Reduction
Act is signed. I don't think you'll
be able to find 87,000 people who
have the base level of competency
required [that quickly], " Ed Zollars,
CPA, an instructor at Kaplan Financial
Education, said on the Current Federal
Tax Developments podcast on Aug. 14
(https://tinyurl.com/bddt397t). " It's
going to take quite a bit of time to
ramp that up. I don't think I'm currently
worried about the IRS knocking
down the door of my clients' offices
anytime soon. "
So where did that 87,000 number
come from? According to a September
blog post (https://tinyurl.
com/3a2d547j), Jesse LaGrossa, manager
of business valuation, forensic
and litigation support services at Marcum,
wrote that The American Families
Plan Tax Compliance Agenda published
by the Treasury Department in May
2021 included a proposed IRS funding
plan for the next 10 years. Page
16 of that report includes a proposal
for funds of approximately $79.2 billion-very
close to the $79.6 billion
allocated in the Inflation Reduction
Act. Table 3 on page 16 indicates that
such an allocation of funds would
allow the IRS to hire an estimated
86,852 full-time equivalent
(FTE)
employees (approximately 87,000) over
the next decade.
" Did Congress appropriate more
federal funds to the IRS than in recent
years? Yes. Those funds will presumably
be used to hire additional staff at
all levels, including revenue agents,
revenue officers, special agents, and
other professional staff-not just
'agents,' " he wrote. " While some of
the estimated 86,852 FTE employees
budgeted for will replenish staffing
attrition due to retirement, career
changes, etc., the hiring of approximately
87,000 FTE employees over a
10-year period can be construed as a
significant expansion of the IRS. "
The problem the IRS will face is
the same problem anyone in business
today who is hiring is facing
right now: it is tough to find the right
people, Mark Everson, former IRS
commissioner and current vice chairman
at Alliantgroup, said during an
appearance on the " This Week on Tax
Notes Talk " podcast on Nov. 1 (https://
tinyurl.com/f7rz79bh).
" We have a shortage of workers
right now for a variety of reasons,
and I think that's very true across
accounting and tax in the private
sector. It's also of course true for
the IRS. They've struggled to bring
on people that they had authority
to bring on with the COVID-19 relief
funds, " he said.
Fortunately for the IRS, the agency
was given direct-hire authority,
allowing it to quickly fill vacant positions,
even offering jobs to qualified
people on the spot. On Oct. 27, the
IRS announced it has hired 4,000
new customer service representatives
to answer phones and provide other
services for the 2023 filing season.
These new staffers were hired over
the past several months and are
being trained to provide assistance
to taxpayers, including answering
phone questions.
That's good-for both taxpayers
and tax professionals-as hold times
to get a question answered by an
IRS representative have averaged
23 minutes. And that is if your calls
to the IRS get answered-of the 282
DECEMBER 2022/JANUARY 2023 ■ www.CPAPracticeAdvisor.com
13
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