House GOP leaders vow to undo $80B to rebuild IRS if party regains majority – Federal News Network

Barely a month after the IRS got $80 billion to rebuild its workforce and upgrade its legacy IT, House Republican leaders are making repealing this funding their top legislative priority ahead of this November’s elections.

House Minority Leader Kevin McCarthy (R-Calif.), speaking in Pittsburgh on Friday to promote the House Republicans’ legislative agenda, said a GOP-controlled House would introduce legislation that would block the IRS from receiving funds from the Inflation Reduction Act that President…

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Barely a month after the IRS got $80 billion to rebuild its workforce and upgrade its legacy IT, House Republican leaders are making repealing this funding their top legislative priority ahead of this November’s elections.

House Minority Leader Kevin McCarthy (R-Calif.), speaking in Pittsburgh on Friday to promote the House Republicans’ legislative agenda, said a GOP-controlled House would introduce legislation that would block the IRS from receiving funds from the Inflation Reduction Act that President Joe Biden signed into law in August.

“On that very first day that we’re sworn in, you’ll see that it all changes. Because on our very first bill, we’re going to repeal 87,000 IRS agents. Our job is to work for you, not go after you,” McCarthy said.

McCarthy’s election pledge marks the latest in a series of commitments made by congressional Republicans to eliminate the multi-year IRS funding that passed by the slimmest of margins.

Before arriving on President Joe Biden’s desk, the Senate passed the legislation 51-50, with Vice President Kamala Harris casting the tie breaking vote.

Sen. Joe Manchin (D-W.Va.) brokered the legislation with Senate Majority Leader Chuck Schumer (D-N.Y) after he rejected the Build Back Better Act, a much larger spending package that also included $80 billion for the IRS.

House and Senate Republicans unanimously voted against the Inflation Reduction Act, and have spoken out against the legislation since its passage.

Sen. Rick Scott (R-Fla.), in an open letter to “America’s job seekers” in August, warned prospective hires not to seek jobs at the IRS, warning that congressional Republicans would seek to reverse the agency’s $80 billion rebuilding efforts if they take control the House or Senate — or both.

”These new positions at the IRS will not offer you the long-term job stability you may expect from a position with the federal government,” Scott wrote on Aug. 16. “Put another way: this will be a short-term gig. Republicans will take over the House and Senate in January, and I can promise you that we will immediately do everything in our power to defund this insane and unwarranted expansion of government into the lives of the American people.”

Congressional Republicans have specifically focused their criticism on the IRS hiring 87,000 employees, a figure that requires additional context.

The Treasury Department, in a May 2021 report, estimated the IRS could hire nearly 87,000 employees over a decade, if it received the then-proposed $80 billion in funding.

However, many of those hires will help the IRS keep up with its rate of attrition. The same report projects that 52,000 IRS employees will retire or otherwise leave the agency over six years.

Meanwhile, IRS recently told Congress that, after more than a decade of budget cuts, the agency had 33,000 fewer employees in 2020 than it did a decade ago.

“All of my years in Congress, I have never had a single phone call from anybody saying, ‘Steve, please add more people to the IRS,’” House Minority Whip Steve Scalise (R-La.) said at Friday’s campaign stop. “If there’s 87,000 people needed in America, it’s at the border, to secure America’s border. Not at the IRS, to go after small businesses and hard-working families.”

Treasury Secretary Janet Yellen recently told IRS employees at a field office in New Carrollton, Maryland, that the IRS won’t use its newfound funding to increase the audit rate, “relative to historical levels” for households making less than $400,000 a year.

Yellen and former IRS executives expect the IRS will be able to go after high-income earners that make a disproportionate amount of the “tax gap” between what taxpayers owe and what the IRS collects every year.

“In fact, we expect audit rates for honest taxpayers to decline once the IRS has the right technological infrastructure in place. And that means a simpler tax filing season for taxpayers who are doing everything right,” Yellen said.

Yellen also told IRS employees that the IRS will be able to dramatically improve its level of taxpayer service next filing season through the multi-year funding it has received.

“A strong IRS is critical to the economic success of this country, and I am heartened that we are finally reflecting that in our funding decisions,” Yellen said.

Meanwhile, current and former IRS officials expect the agency, with additional resources, will be able to reduce its rate of “no change” audits, in which its enforcement division finds at the conclusion of an audit that no additional taxes are owed.

Chad Hooper, executive director of the Professional Managers Association, which represents IRS managers, said in an August interview that the IRS, with this funding, will be able to provide a much higher level of customer experience to taxpayers.

“It would completely change everyone’s relationship with the service,” Hooper said. “It’d be so much easier to use. I can’t imagine it being a bad choice for anyone. It’s such an easy ‘yes,’” Hooper said.

Rep. Patrick McHenry (R-N.C.), however, rejected claims that beefed-up enforcement wouldn’t result in the IRS going after a broad swath of taxpayers.

“Do they really need 87,000 people to go after billionaires? No, they’re coming after your PayPal account. They’ve changed regulations so they can look at your bank accounts of $600 or more transactions,” McHenry said. “So those 87,000 are not about someone else. They’re about every one of us who are taxpayers. We’re going to stop that, we’re going to check that, and we’re going to put you back in charge of your own accounts.”

According to the independent Taxpayer Advocate Service, individuals and businesses must report income greater than $600 per calendar year through platforms like Venmo or PayPal, if the income is from business transactions for goods and services.

TAS added that payments on these platforms can be designated as either going to family and friends, which don’t need to be reported to the IRS, or business transactions that are subject to IRS reporting.

“This designation will determine if the transaction(s) result in the issuance of a Form 1099-K,” TAS wrote. “If the payment(s) are incorrectly marked as a business transaction, and the calendar year total exceeds $600.00, a Form 1099-K will be issued and the IRS will expect to see the income reported on your tax return.”

While reporting this type of income has always been required, the American Rescue Plan lowered the threshold from $20,000 to $600 for tax years 2021 and beyond.

While the $80 billion figure represents a major reversal of fortune for the IRS, which has faced budget cuts for more than a decade, Hooper said the figure reflects more than a decade of resource planning at the IRS.

“This $80 billion number didn’t come out of thin air. We worked really hard to imagine a future state for the IRS, and we did. We’ve been doing that since 2010. And so all of the things that we need, and the resources that we would need to do it, are things that have been conceived and have rollout timelines that have been studied for feasibility,” Hooper said.

The IRS, Hooper explained, over the years put together plans for what it could afford to modernize on its own, what it could probably afford to do if it worked with Congress to receive a modest boost in funding, and what it could accomplish “if anything was possible.”

“This number is the ‘if anything was possible’ number,” Hooper said.

With or without congressional Republicans challenging this funding, the IRS will encounter challenges hiring and bringing its largely paper-based work into the digital age.

While the IRS is getting the funding it needs to rebuild its workforce and legacy IT over the next decade, the agency still struggles with pay and time-to-hire challenges that persist across the entire civilian federal workforce.

Lawmakers, meanwhile, in an Aug. 12 letter to IRS Commissioner Chuck Rettig, pointed to a June report from the National Taxpayer Advocate showing that the IRS hired just over 3,400 of the 5,000 customer service representatives it planned to bring on board before the end of the calendar year.

“I am confident that they can take this ball and run with it. The first year or two aren’t going to be easy, and I don’t think anybody believes that it’s going to be. It’s going to take some time for them to find their footing and get into a productive cadence with appropriation, particularly when it comes to the modernization projects,” Hooper said.

Yellen said the IRS workforce, over the coming years, will be able to “create a modernized IRS that serves people efficiently, collects taxes that erode and delivers credits and benefits to those who are entitled to them.”

“Over the coming weeks and months, you will be asked getting to meet the moment. As with all big things, it will be difficult. But I hope it will be mostly exciting,” she said.

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