IRS Enforcement Fund Short $20 Billion

The Internal Revenue Service has found itself $20 billion short in its efforts to increase enforcement of the federal tax code, The Wall Street Journal reported on Tuesday.

In April of 2023, the IRS announced it was aiming to hire 20,000 new employees over the next two years and employ new technologies as part of an $80 billion investment from the Inflation Reduction Act of 2022. The funds were intended to improve tax-enforcement and customer service. When the GOP took over the House, they began pulling back on IRS funding, striking deals with Democrat President Joe Biden which left roughly $24 billion remaining for tax enforcement. The agency claims it loses close to $500 billion a year in unpaid taxes.

Deputy Treasury Secretary Wally Adeyemo said due to language in the current law governing federal spending, close to $20 billion of the agency's $22.4 billion remaining in enforcement funding is essentially frozen. Adeyemo told the outlet it was critical for Congress to address the issue promptly in its upcoming spending bill to give the IRS access to the frozen funds.

"Our concern right now is that because of this risk to the IRS and the uncertainty of it, the IRS is going to potentially have to make dramatic decisions about stopping hiring," he told reporters Tuesday. "They are running low on enforcement dollars today."

With Republicans set to take complete control over the federal government next year, the fate of IRS funding remains in doubt with the GOP likely to scale back enforcement, arguing the agency's authority has become too intrusive on Americans. Adeyemo has said without the additional funds, the IRS will do 2,000 fewer audits of large corporations and 6,000 fewer audits of high-income individuals.

President-elect Donald Trump has floated the idea of abolishing the income tax and pulling government needed revenue from tariffs instead. In October, while campaigning in the Bronx, Trump was asked by a local barber if it was possible to get rid of the income tax.

"When we were a smart country, in the 1890s … this is when the country was relatively the richest it ever was. It had all tariffs. It didn't have an income tax," Trump responded. "Now we have income taxes, and we have people that are dying. They're paying tax, and they don't have the money to pay the tax."

The IRS had planned on spending the remaining funds from fiscal 2026 through 2029, yet Congress would need to explicitly exempt the $20 billion cut or it will become part of the future 2025 temporary spending bill.

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