Passage of the IRA Means the Taxman Cometh | Citizens Against Government Waste

Passage of the IRA Means the Taxman Cometh

The WasteWatcher

Among the costly, wasteful, and intrusive provisions in the Democrats’ partisan misnamed “Inflation Reduction Act of 2022” (IRA), is a massive increase in funding for the Internal Revenue Service (IRS) and a requirement that the agency study the feasibility of developing software that would prepare personal tax returns for taxpayers and send them the bill.

The IRA would provide the IRS $80 billion, which is a 600 percent increase in its current budget, to hire 87,000 new agents over the next 10 years, which would make the IRS larger than the Department of State, FBI, and Customs and Border Patrol combined.  The bill also provides $15 million for the IRS to report to Congress on how the agency could develop its own “free direct efile tax return system.” 

The IRS has been on the Government Accountability Office’s High-Risk List since 1990, due to its failure to accomplish its core mission.  These inadequacies are obvious since it has been widely reported that the agency cannot answer all of the phone calls it receives or process tax returns in a timely manner.

Yet the idea of giving the IRS the power to pre-fill out tax returns and send a bill to taxpayers keeps resurfacing despite the past waste of money on a similar effort.  In 1995-1996, the IRS tried and failed to complete the development of its Cyberfile system, wasting $17 million in the process.  The debacle of the Cyberfile system was among the many reasons that the highly successful Free File system began operating in 2003.  This public-private partnership allows up to 70 percent of taxpayers to file for free.  Yet Congress is now giving the IRS $2 million more than it already squandered to create what will undoubtedly be the same result as Cyberfile more than 25 years later.

Tax preparation is a highly individualized and personal process, and the deductions taxpayers are eligible for can vary from year to year depending on their circumstances.  People get married and divorced, have children, change jobs or work more than one job, and start their own business.  Someone who works on a commission can see significant fluctuations in income from one year to the next, particularly if they work in businesses likes advertising, car sales, and real estate.  

Only taxpayers know what they owe, so there is no reason to force them to pay for something that is currently free, or to give the IRS the ability to fill out their tax returns in advance and send them a bill.  Yet, members of Congress, like Sen. Elizabeth Warren (D-Mass.) and Reps. Brad Sherman (D-Calif.) and Katie Porter (D-Calif.), continue to push the erroneous narrative that the IRS knows every single change in an individual’s life and can calculate their taxes for them and send them a bill.  The 87,000 new tax enforcement officers and agents are highly like to pay a visit to taxpayers who do not agree with the IRS bill and send back a check.

It won’t matter how much is earned by an individual or couple, even the lowest income earners will be affected by the new funding in the IRA.  According to a March 8, 2022, Syracuse University Newhouse School of Public Communications and Whitman School of Management study, “low-income wage earners with less than $25,000 in total gross receipts [are] being audited at five times higher than for everyone else.” 

The IRS has failed in the past to develop software and has trouble maintaining its current IT systems, which has kept it on the GAO’s High-Risk List for more than 30 years.  It should be the last agency to get such a significant influx if funds.  After the IRA passes the House and President Biden signs it into law, there may be future opportunities to slow down or eliminate the increase in funding.  However, for now if they actually manage to get such a program operational, with 87,000 new auditors and enforcers at its disposal, taxpayers should be prepared to review their statements from the IRS with intense scrutiny and be ready for the taxman cometh.