Wealthy taxpayers with particularly creative or aggressive tax reduction strategies may be concerned by the roughly $80 billion being added to the Internal Revenue Service’s budget over the next ten years, particularly with the roughly $45.6 billion allocated to increase enforcement, and roughly $25.3 billion and $4.8 billion allocated to operations support and business systems modernization respectively.
Lower and middle-income individuals, on the other hand, may see a bit of relief from the Act’s tax provisions. Many taxpayers who took advantage of increased health insurance premium tax credits that were made available in 2021 and 2022 will be pleased to know that the Act would extend these increased subsidies through 2025. Additionally, they may find that dealing with the Internal Revenue Service becomes much less onerous due to the increased funds for business systems modernization mentioned above, as well as the roughly $3.8 billion allocated to taxpayer services in particular.
For many, the Internal Revenue Service is the ultimate example of a confusing, outdated, and impenetrable bureaucracy, and for good reason. Decades of failure to allocate necessary levels of operational funding, and particularly funding for upgrades and modernization, have left the Service severely outdated and understaffed in some areas. While progress has been made with certain online tools in recent years, taxpayers looking to resolve tax problems, or simply stay compliant with the law often find that they can’t get through to anyone on the phone, or they’re forced to utilize outdated and inefficient tools, such as fax machines instead of electronic communication, which many do not have easy access to. Many taxpayers’ experiences with the Service have been that while it is quick to send out a letter when there’s a problem, actually resolving the problem can be a difficult, lengthy, and frustrating prospect.
This experience has only gotten worse since the onset of the COVID-19 pandemic, with the Service’s long hold times turning into flat-out busy messages without the ability to leave a voicemail, and many taxpayers finding that when they finally give up on the phone and send in a letter, they may not receive a response for several months. For taxpayers who just want to pay their taxes, handle any mistakes, and spend as little time of their life as possible thinking about and dealing with taxes, increased Internal Revenue Service funding in these areas will be a welcome change.
Similarly, taxpayers with simple returns, who have had taxes taken from their pay checks all year and are required to file a return to get the excess refunded each tax season, often feel the injustice of either having to pay a private company significant fees to e-file a return on their behalf, or fill out a paper form and potentially wait months to receive a refund. Such taxpayers will be pleased to learn that the Act provides $15 million to fund an investigation and report to Congress on the cost of developing a free direct e-filing tax return system, beginning the process of implementing a program that has long been fiercely opposed by commercial tax preparation companies.
While the provisions of this Act aimed at promoting green energy and reducing health care costs will likely garner the majority of reporting on the Act, and may broadly impact the national and global economy and environment for years to come, the significance of the additional funding provided to the Internal Revenue Service should not be lost in the mix. While a robust and modern Service may be cause for worry for some taxpayers, other taxpayers may have better experiences with the Service moving forward.