Funding Boost For The IRS Could Raise $497B

The Inflation Reduction Act's investment in the Internal Revenue Service could raise $497 billion over a decade, marking a significant increase over the agency's previous estimates of how much revenue the law's funding boost would generate, the agency said Tuesday.

The IRS' previous estimates suggested that the 2022 law's funding boost would bring in $390 billion in revenue between fiscal years 2024 and 2034, but the agency's old process for estimating revenue was "extremely conservative," according to the white paper released by the IRS and the U.S. Department of Treasury.

According to the agency's new estimates, which take into account direct revenue and the effects of "soft notices" in addition to the effects audits have on taxpayer behavior, the funding boost could raise as much as $497 billion.

The new estimates include the effects of "specific deterrence," which finds that taxpayers who are audited are more likely to be compliant during future years, according to the white paper.

The IRS' previous estimates of the Inflation Reduction Act's revenue effects assumed that the agency would maintain its recent operation practices and that those practices would become less effective as they were scaled up, according to the paper.

The New Estimates Consider The Full Range Of Ways That
The Technology, Data And Service Improvements Funded
By The Inflation Reduction Act Will Increase Revenues.

The new estimates assume that the IRS is sufficiently funded from fiscal year 2024 through fiscal year 2034 in addition to the funding provided by the Inflation Reduction Act, the paper said.

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Read more at: Tax Times blog