The IRS is set to receive billions in new funding to catch wealthy tax evaders, but the effects may not be visible for years and enforcement could initially drop as agency workers are pulled away to train new agents.
The Internal Revenue Service will receive $45.6 billion in enforcement funding as part of a nearly $80 billion funding increase included in the Inflation Reduction Act, Democrats' tax, climate and health care bill by President Joe Biden.
However, former senior agency officials told Law360 it will take years for the IRS to ramp up enforcement efforts following the funding boost. Hiring a large number of workers will take time, as will training them. Further, existing employees will be involved in training new personnel, and senior agency management will need to put plans in place to avoid significant disruptions to their work, they said.
"As you get new funding to hire more auditors, instead of revenue going up it often goes down" initially, according to former IRS Commissioner Lawrence Gibbs, who is now withMiller & Chevalier Chtd. "You're taking experienced agents out of the line working to train new agents and that's an extremely important task."
Measures of enforcement performance often decline somewhat the first year or two after the agency receives new funding, said Mark Matthews, a former deputy commissioner of services and enforcement at the IRS and a former chief of the agency's Criminal Investigation division. That's because the most effective agents are typically taken offline to train new workers, said Matthews, who is now at Caplin & Drysdale.
"The programs with the longest training cycles like criminal investigation generally will take longer to show progress statistically," he said.
Tax Situations, Meaning The Agents Pursuing
Them Will Need Extensive Training.
IRS Commissioner Chuck Rettig told agency employees this month that the law provides needed resources to address noncompliance among large corporate and wealthy taxpayers, along with pass-throughs and multinational companies with international tax issues. Doing so will require sophisticated and specialized teams that can analyze complex structures to ensure fairness in the system, he said.
Eric Hylton, a former commissioner of the agency's Small-Business/Self-Employed division and former deputy chief of the Criminal Investigation division, told Law360 that fully training compliance personnel generally takes about three years.
Training includes a year of classroom and on-the job instruction for revenue agents, who perform audits, and revenue officers, who collect taxes, he said. Revenue agents receive additional training.
Special agents in the IRS' Criminal Investigation division receive training for six months at the Federal Law Enforcement Center, then do one to two years of on-the-job training with an experienced special agent, said Hylton, who is now national director of compliance at Alliantgroup.
To reduce the training burden on existing workers, CI is using contractors and recent retirees for some academy and on-the-job training roles, Cole said. The division is also increasing its use of technology in training, he said.
Improved technology will play a part in boosting collections, Koskinen said. Audit rates for wealthy people and corporations have dropped much more than others, and increasing them to be on par with historical rates "will generate significant funds," Koskinen said.
Treasury Secretary Janet Yellen has to submit a report within six months detailing how it plans to spend the nearly $80 billion provided by the Inflation Reduction Act. Meanwhile, Rep. Bill Pascrell Jr., D-N.J., who chairs the House Ways and Means Oversight Subcommittee, has Rettig to provide him a spending plan by Aug. 30.
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Read more at: Tax Times blog