One year after the Internal Revenue Service received huge cash inflows, the agency said it has increased its full-time staff to nearly 90,000, a level not seen in over a decade.
The additional hiring comes as the IRS — which received $80 billion last year as part of the inflation-reducing law — has prioritized hiring at the agency, which has seen its budget and rankings shrink over the past decade.
The agency is trying to hire new employees to improve taxpayer services and crack down on wealthy and sophisticated tax evaders, according to IRS Commissioner Daniel Werfel.
However, the agency faces an uncertain future. Republican lawmakers have accused the IRS of planning to use its new funding to harass small businesses and middle-class families. They succeeded in recovering $20 billion from the agency’s new pot of funds as part of an agreement reached earlier this year between Republicans and Democrats on suspending the nation’s debt limit, leaving the IRS with $60 billion to implement comprehensive reform plans.
Mr. Werfel, in a briefing with reporters Tuesday afternoon, said recent IRS accomplishments, such as the digitization of paper tax filings and improved response to taxpayers, should allay Republican concerns about the agency’s intent.
“There have been suggestions that this funding would have provided for an army of armed IRS agents who were out to unsettle the average taxpayer,” Mr. Werville said. “This legend must be calmed down.”
IRS funding is intended to help the agency recover from debilitating budget cuts over the past several years. President Biden said the additional money would help the agency pursue tax fraud, narrowing the $7 trillion tax gap in money owed to the federal government but expected not to be collected over the next decade. While the augmented app is a big part of that, the IRS has focused on enhancing its developed technology and improving the service.
The agency has been racing to digitize tax forms and reduce holding times that have frustrated taxpayers trying to contact the IRS for help. Average wait times dropped to 3 minutes from 28 minutes during the 2023 tax season, and the agency filtered more than 20 million unprocessed tax forms in 2022.
To underscore the idea of a friendlier IRS, Mr. Werfel pointed out that the agency announced last month that it would dramatically limit unannounced visits by agents to homes and businesses. The move is intended to reduce tension between IRS agents and taxpayers and help eliminate fraud by people impersonating IRS employees. Despite signs of progress, the IRS still faces significant challenges as it upgrades its operations and improves its reputation.
This month’s report was found by the Treasury Inspector General for the Tax Administration, an IRS watchdog ‘Major shortcomings’ In protecting sensitive taxpayer information at tax processing centers. If the information stored on the microfilm cartridges is not properly stored or accounted for, it said, it could be used to commit tax refund fraud and identity theft.
The IRS is also back in the political spotlight this summer after two veteran IRS investigators slammed the Justice Department for its handling of the tax case against Hunter Biden, the president’s son. They accused the agency of shielding Mr. Biden from criminal charges over politics and preferential treatment. The agents also said they faced retaliation internally after filing the whistleblower disclosures.
But leadership in the IRS remains focused on how it can use its new resources to show tangible signs of progress, such as answering phones and quickly returning refunds.
The IRS’ 90,000 full-time employees represents a sharp increase from 79,070 in 2022. The IRS hasn’t had more than 90,000 full-time employees on its payroll since 2012, according to the 2022 IRS Data Book.
Most of the new hires were in the Payroll and Investment Division, a client-service arm of the IRS. Werfel said the agency was actively hiring staff from accounting and law firms and was bringing in data scientists to use mathematical tools to identify taxpayers whose returns indicate they should face scrutiny.
While Biden administration officials have described the first year of the IRS modernization plan as a success, significant uncertainty remains. Includes ongoing funding for the agency. The deal reached in June to avoid defaulting on the country’s debt included an agreement between the White House and Republicans to cancel $20 billion in funding for the agency.
Mr. Werfel suggested that the clawback wouldn’t curtail the agency’s ambitions in the near term, but said further cuts to its annual budgets could eventually lead to IRS resources that were intended to modernize the agency to be tapped instead to fund its day-to-day operations. However, he expressed optimism that an IRS improvement would win over Republican skeptics who had seized on cutting agency funding.
“I think if we’re funded into our base, with $60 billion, we can build the momentum to prove to Congress and the American people that investments in the IRS pay off for taxpayers in a very positive way,” Mr. Werfel said.