IRS Announces 10-year $80 Billion Tax Collection Overhaul

The Internal Revenue Service (IRS) recently announced a 10-year plan to enhance its capabilities to collect outstanding tax debts and improve collection processes. The $80 billion IRS tax collection overhaul will allow the department to hire accountants, data scientists, and other essential employees to pursue missing tax dollars.

Here is more about the tax collection overhaul and what it may mean for your future tax returns.

About the New IRS Plans for Collections

The IRS received the $80 billion cash injection through the Inflation Reduction Act of 2022, which strives to bolster clean energy and climate management programs and reduce prescription drug prices. The department expects to use the funds to pursue $7 trillion in uncollected tax revenue.

The IRS tax collection overhaul includes:

  • Updating old technology
  • Eliminating the paper tax return backlog within five years
  • Moving to a fully digital correspondence process within five years
  • Hiring 7,000 accountants, data scientists, attorneys, and other enforcement workers
  • Hiring 80,000 employees in customer service, IT, office systems, and other areas
  • Improving customer service methods and training
  • Raising audit rates for the ultra-rich to similar levels as in 2011 and prior
  • Collecting outstanding tax debts ($7 trillion) for climate change initiatives, prescription drug costs, and the $30 trillion national debt

Potential Benefits of the IRS Tax Collection Overhaul

Possible benefits of the IRS plans include the use of outstanding tax debts from the ultra-rich to pay for programs that benefit future generations. Other benefits of the new program include:

  • Making tax returns and other tax filings easier and fairer for all Americans
  • Replacing inefficient technology
  • Allowing taxpayers to submit their tax returns and fix errors electronically

Previously, taxpayers (or their accountants) had to submit paper returns directly to the IRS or use a third-party tax preparation company to e-file their tax returns. The IRS intends to develop a digital tax filing system that will allow taxpayers to file electronically and catch errors on their tax forms before filing, which may reduce the number of audits each year.

Potential Downsides of the IRS Tax Collection Overhaul

Although the IRS states that their primary goal is to pursue unpaid taxes by the ultra-rich, complex partnerships, and large corporations, there is the potential of increasing audit rates for lower-income families. Studies have shown that the IRS regularly audits low-income families at approximately three times the rate of other taxpayers because some of these families claimed the earned income tax credit.

Despite claims that the audit rate wouldn’t increase for people earning under $400,000, the IRS may not know whether someone is reporting their income truthfully without an audit. Other potential downsides to the new IRS plan include:

  • Increased pressure from tax preparation lobbies that don’t want a free-to-use tax filing system
  • Delays in pursuing high-income individuals and corporations due to hiring and staffing issues

Only about 2% of American households earn $400,000 or more. Large corporations and business partnerships often have large legal teams that attempt to help their clients bypass legal tax collection through loopholes and offshore accounts. It could take several years for the IRS to build up the manpower to pursue these parties.

Contact Levy & Associates Tax Consultants for Questions About New IRS Policies

The $80 billion IRS tax collection overhaul plan may or may not affect you or your family. If you find yourself the subject of an IRS tax audit, our team at Levy & Associates Tax Consultants can help. Call us at 800-TAX-LEVY (800-829-5389) or contact us online to speak with a tax professional at our offices in Michigan or Florida.

Contact Levy & Associates for Dependable Tax Audit Services

Levy & Associates is available for free initial consultations. We’re happy to answer any questions you have about the audit process or address any concerns about your specific situation.

There’s never a good time to be audited, and the time-consuming process will take away from your business or family if you try to face it alone. Let us handle and coordinate communication, so you can return to your daily life.