Funding Cuts Impact IRS Spending Plans

Earlier this week, President Biden and Speaker Kevin McCarthy reached a deal to suspend the nation’s debt limit and avoid a default. The House of Representatives passed the bill on Wednesday night and the Senate gave its approval on Thursday night. As of Friday morning, President Biden has promised that he will soon sign the bill. Among the spending cuts included in the bill is the loss of more than $21 billion in funding to the IRS, including $1.39 billion in funds given to the IRS as part of the Inflation Reduction Act (discussed by Tax Tracker here by Michelle E. Espey: More money, more IRS audits?).

The IRS originally planned to improve operations, invest in new technology, hire additional customer service representatives, and expand its ability to audit high-wealth taxpayers with its originally anticipated 80 billion in funding. See The Inflation Reduction Act Strategic Operating Plan (Publication 3744 (Rev. 4-2023) (irs.gov)) release in April. While a default has been averted, the IRS must now contend with how these funding cuts will impact its plans.

Thank you to Colleen Spain for this week’s Tax Tracker!