US IRS to unveil $80 billion 10-year spending plan this week, Yellen says

WASHINGTON (Reuters) – The Internal Revenue Service will unveil its long-awaited 10-year spending plan for $80 billion in new funding to beef up enforcement and taxpayer services, U.S. Treasury Secretary Janet Yellen said on Tuesday, promising major investments in new technology and services.

In prepared remarks at the swearing-in ceremony of new IRS Commissioner Danny Werfel, Yellen said the IRS Strategic Operating Plan will outline the agency’s plans in greater detail to invest in data and analytics to help it audit large corporations, high earners and complex partnerships.

“The technology will be complemented by hiring more top talent, including accountants and attorneys,” Yellen said. “These additional resources will help us peel back complex corporate structures and large taxpaying entities – and make sure that they pay what they owe.”

The $80 billion in new funding for the IRS over a decade, provided through last year’s climate-focused Inflation Reduction Act, is aimed at improving tax compliance and shrinking the “tax gap” between taxes owed and those paid, estimated by the Treasury at around $600 billion a year.

It has been a source of considerable controversy in Washington, with some Republicans in Congress seeking to repeal the funding in exchange for increasing the federal debt ceiling this year.

Yellen repeated her vow that the funding would not be used to increase audit rates for small businesses and households earning under $400,000 a year relative to historical levels.

So far, the Treasury has emphasized initial spending on improvements to customer service, including hiring 5,000 new employees to answer telephones and staff taxpayer service centers.

Yellen said the spending plan would include investments in technology to digitize and automate paper processes, spot errors in returns and avoid unnecessary audits of “honest taxpayers.”

A U.S. Treasury official said that within the first five years of the IRS investment plan, taxpayers will be able to securely file all documents and respond to all notices online. They also will be able to securely access and download their data and account history, the official said. Currently, taxpayers must rely on third-party providers and tax preparers to file returns electronically.

(Reporting by David Lawder; Editing by Paul Simao)