IRS Issues New Strategic Plan – See What They Actually Want

The IRS recently issued a strategic plan that broadly describes how it intends to use the 10-year, $80 billion addition to its budget. Major items include helping taxpayers answer questions about their returns and, of course, increased audits for “the rich.”

That the agency wants to “[d]ramatically improve services to help taxpayers meet their obligations and receive the tax incentives for which they are eligible” is a good thing. The Taxpayer Advocate's office has flagged IRS customer service as a “serious problem” that predates the most recent excuse for bad service, the COVID-19 pandemic.

Getting the taxman to answer his phone in a timely manner…and then be able to answer a taxpayer's question correctly (another major problem)…would be a tremendous step in the right direction.

But the real thrust of additional IRS spending has always been to squeeze more money out of taxpayers in order to fund more government. Initially, the Biden administration thought increased enforcement would yield roughly $700 billion over a decade.

In its strategic plan, the IRS notes that Congressional Budget Office estimates are only for an additional $180 billion over 10 years. But the tax agency also believes:

…[the] actual increase will be greater, since all our efforts as outlined in this plan—including in the areas of service, issue resolution and effective enforcement—will increase overall tax compliance.

That's an artful way of saying the threat of audits will intimidate scofflaws to pay up. But it also assumes those same people currently dodging taxes will not employ even more creative means of sheltering their money.

But the IRS also assures the taxpaying public at large that those who earn $400,000 or less have nothing to fear from an expanded enforcement effort:

All compliance efforts will be consistent with the Secretary of the Treasury's August 10, 2022, directive that IRA resources are not used to increase the share of small businesses or households earning $400,000 or less that are audited relative to historical levels.

What “historic levels” means is anyone's guess. As The Wall Street Journal reports:

The administration had previously said that audit rates for those households wouldn't exceed historic levels, but officials hadn't been more specific. Audit rates in recent years have been lower than in decades past.

The general lack of specifics, including on enforcement, is troubling to independent taxpayer watchdogs. The National Taxpayers Union's Pete Sepp writes:

We also urge the IRS to exercise caution with its supplemental enforcement funds. Reducing the tax gap remains an important public policy mission, but doing so in a way that disregards taxpayer rights and due process – or ensnared  innocent taxpayers or those who made honest mistakes – would result in more harm than good, further eroding public trust in the IRS. As National Taxpayer Advocate Erin Collins recently stated, ‘[t]he most efficient way to improve compliance is by encouraging and helping taxpayers to do the right thing on the front end. That is much cheaper and more effective than trying to audit our way out of the tax gap one taxpayer at a time on the back end.'

We'll discover whether the IRS prefers carrots or sticks in its effort to close the “tax gap.” It may depend on the incentives handed to the agency. Here's a hint of what may be to come: the biggest slug of new spending is for enforcement.

The opinions expressed in this article are those of the author and do not necessarily reflect the positions of American Liberty News.

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