The IRS looks very different in 2023 compared to just a few years ago. The agency has been hiring aggressively and is undergoing a digital transformation, thanks to a significant funding boost from the Inflation Reduction Act (IRA).
As part of the IRA, the IRS received $80 billion a year ago to improve lagging taxpayer services and start closing the estimated $7 trillion tax gap expected to go uncollected over the next decade.
Even after losing $20 billion of IRA funding during this year’s debt ceiling negotiations, the IRS now boasts nearly 90,000 employees—the highest headcount in over a decade, up from just 79,070 in 2022.
“I believe that if our base funding is maintained, the $60 billion [from the IRA] will allow us to build momentum and show Congress and the American people that investing in the IRS delivers real value for taxpayers,” IRS Commissioner Daniel Werfel told the press this week.
Faster taxpayer services—and quicker claim processing?
Werfel’s top priorities for the IRS include digitizing paper tax filings for 2023 and beyond, as well as improving responsiveness to taxpayers.
Already, average wait times for IRS phone calls have dropped from 28 minutes to just 3 minutes since the funding boost. The agency has also cleared a backlog of 20 million unprocessed tax forms.
This is a major win for most taxpayers, who can now expect far fewer delays in receiving their tax refunds thanks to a stronger IRS.
Werfel has emphasized that he’s leading a more “user-friendly” IRS than in the past, and has previously announced limits on unannounced agent visits to taxpayers. The goal is to reduce taxpayer anxiety and curb the rise in impersonators pretending to be IRS agents.
While most new hires have focused on customer service, the IRS has also been recruiting talent from accounting and law firms, and bringing more data scientists on board.
The aim of these hiring efforts is to expand the agency’s ability to identify which taxpayers should be audited.
A renewed focus on audits moving forward
With new staff, increased funding, and more access to data science and accounting expertise than it’s had in a decade, the IRS is poised to uncover more errors and, as a result, conduct more audits as 2022 and future filings come in.
The announcement of new funding comes as many startups and small businesses across the country are working to finalize their claims ahead of critical October tax extension deadlines.
Already, businesses are facing higher tax bills and a more complex federal R&D tax code this year, with new rules on amortization and capitalization now in effect (see our Section 174 coverage here). Ongoing fallout from recent tax court decisions and even more confusion around Section 41 qualifications have made filing a guessing game for many small businesses.
In the end, businesses need to make sure their claims are as detailed as possible this year to avoid getting caught in an audit that could delay access to crucial capital.
If you’re a startup founder working toward the October tax extension deadline, now is the time to align your key financial and workflow data to build a strong claim that maximizes your tax credits and stands up to any audit.
At Boast AI, we’ve recently upgraded our platform to help businesses do exactly that. By enabling seamless integration of your key resources, our Enhanced AI Classifier can automatically categorize your projects, giving SMEs fast claim processing and audit-ready records.
Unlock your product roadmap’s full potential and rethink your funding strategy. Book a call with our team today and see how Boast AI can help you achieve your goals.
