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Secretary Yellen gives the IRS a deadline for an $80 billion spending plan.

With the signing by President Biden of the Inflation Reduction Act into law on Tuesday, the Internal Revenue Service will be allocated $80 billion to step up enforcement, provide operations support, improve taxpayer services, and modernize their systems.

It has been widely reported that Treasury Secretary Janet Yellen yesterday directed the IRS to provide her with the agency’s proposed spending plan within six months.  In addition to looking for how the agency is proposing to spend the money, Yellen is seeking clear goals and metrics so that the agency’s efforts can be measured..

This follows a letter Yellen sent to IRS Commissioner Chuck Rettig last week indicating the new money should not be used to increase audit activity for small business and individual taxpayers below a $400,000 income threshold.   We previously highlighted this issue – for his part, Rettig has said that the new resources are not meant for “increasing audit scrutiny” on the aforementioned groups.

In the meantime, a bipartisan group of House and Senate lawmakers sent a letter Monday asking the IRS to “extend the suspension of automated collection notices” and “continue the pause on automated notices” until their processing backlogs have been resolved.  These steps, if agreed to, would be welcomed by both taxpayers and tax professionals who have been on the receiving end of such communications.

The letter goes on to point out that in April Commissioner Rettig estimated the IRS would return to a “healthy state” by the end of 2022.  While the new allocation of resources from the Inflation Reduction Act will no doubt have an impact, in a very tough hiring climate and with many IRS legacy systems that need to be modernized, we are perhaps a bit skeptical that the backlog can be turned around that quickly. There is a lot of attention on the new $80 billion dollar allocation, and we hope this will focus the IRS to implement much needed change.

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