Opinion: Why Hiring 87,000 IRS Agents is Important

Written by Probity Tax Recovery's Associate, Tax Consultant and Policy Analyst, Olivia Vong, MPP

We have heard a lot about the IRS’ budget increase from the Inflation Reduction Act. The Act, signed into law in August of this year, has broad implications for taxpayers. For instance, there are myriad credits and incentives available to businesses investing in “clean energy”. Some Americans, however, are more focused on the part of the bill that gave the IRS billions to spend on various things, including “enforcement”. 

The IRS was not shy about its plan to hire 87,000 employees. The result has been a heavily politicized back and forth across all manner of media. Republicans accused the Democrats of trying to make the IRS “…larger than the State Department, the FBI, and the Border Patrol combined.”  Chuck Grassley (R-IA) said in an appearance on Fox News said, “Are they going to have a strike force that goes in with AK-15s (sic) already loaded ready to shoot some small business person in Iowa with these?”

Democrats, on the other hand, claim the funding and subsequent hiring is necessary to reduce tax evasion and increase revenue. Tom O’Halleran (D-AZ), for example, was quoted as saying “It’s important we have the revenue streams.”

We are in a midterm election year so the posturing from both sides is so loud, it is difficult to distinguish fact from noise. What is really happening? 

First, where did they get the 87,000 number? A Vox article cited a Treasury Department report published May 2021 which stated that the IRS could hire 86,852 employees by 2031 with nearly $80 billion in additional funding. The agency is hoping to hire 87,000 over the span of a decade, not all at once. 

This context makes sense given that the agency’s employee base is aging into retirement and the budget cuts it has experienced since 2010 have not allowed it to replace all outgoing personnel. In 2010, the agency had about 94,000 employees. In 2021, that number dropped to about 78,000. Enforcement activity appears to trend with headcount, as shown in the 2021 IRS Data Book. 

Tax assessment and collection requires enforcement. That means people (IRS agents) need to be available to review returns, examine/audit returns, and communicate during the process. The trends in budget and personnel are reflected in enforcement activity over time according to the 2021 Data Book.

The data represents about 0.8% exam rate of all returns filed in 2012. Getting the IRS staffed up to return to return to an exam of less than 1 return per 100 filed does not seem like a scary proposition. 

All these personnel issues were exacerbated by COVID-19. The COVID shutdowns led to IRS personnel working from home. During this time, they were unable to process paper returns. The result was a massive backlog of both income and payroll tax returns. Some taxpayers are still waiting for refunds from this timeframe; the only way to free up these refunds is for the IRS to get more personnel trained up to process claims.

In conclusion, the IRS is a slow-moving, underfunded, understaffed, and technologically behind bureaucracy. It needed something to change in order to perform its mission to serve taxpayers. While controversial, we are crossing our fingers that this additional funding will help small and mid-sized business owners get their refunds in a reasonable timeframe. Given that the funds and hiring are intended for a ten-year period, it may be a while before we see any effect.