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Leaders at the Department of the Treasury are calling on Congress to fix a legislative error and unlock $20 billion in funds for the Internal Revenue Service (IRS) as they negotiate full-year appropriations legislation.
Treasury leaders warn that unless this money is unlocked, the IRS would be forced into a hiring freeze, with fewer audits adding to the national deficit and longer-wait times for customers.
IRS One-Time Cut Duplicated
The IRS was allocated $80 billion under the Inflation Reduction Act (IRA). In the 2023 debt ceiling deal, the White House and Republicans agreed to reduce $20 billion in funding from the IRS over the next two years.
However, the most recent continuing resolution (CR) passed in September inadvertently duplicated the one-time $20 billion cut that was made to IRS funding last year.
“The IRS is going to potentially have to make dramatic decisions about stopping hiring and starting to budget for a world which they don’t have $20 billion which will stop a lot of their progress,” said Deputy Treasury Secretary Wally Adeyemo in a call with reporters.
Drastic Impacts
Deputy Secretary Adeyemo warned of major impacts to the way the IRS conducts business if the cuts are not retracted.
That includes about 6,000 fewer audits of wealthy individuals and 2,000 fewer audits of large corporations, which could add some $140 billion to the national deficit.
“If they don’t get that $20 billion that is at risk they would run out of enforcement money at the current pace sometime in fiscal year 2025,” said Deputy Secretary Adeyemo.
For everyday taxpayers, it could mean dramatically longer wait times on the phone. In the last tax season, the IRS managed to answer some 85 percent of taxpayer calls with an average wait time of three minutes. Deputy Secretary Adeyemo says that wait time could balloon to 28 minutes, with 20 percent of calls answered in the 2026 tax season if the funding does not go through.
Also on the call, Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget, warned not restoring the funding would add to the U.S. deficit.
“Given the fiscal situation we deeply hope there is no backsliding in the coming months and years with rescinding, diverting, repealing any of the revenue that is going effectively into the IRS to help with tax collection,” said MacGuineas.
There are also concerns it could lead to an accelerated retirement timeline for many experienced IRS employees, as well as overall attrition.
“I do worry that if we were to lose funding, you would lose a great deal of the human capital talent that exists at the IRS. And I think a challenge is you can gear back the hiring of people, but the lack of certainty and the ability to sign long-term contracts is something that will hurt the IRS not just today, but over the next five, 10, 15, 20 years,” said Deputy Secretary Adeyemo.
Musk Launches IRS Funding Poll
Meanwhile, Elon Musk, who will co-lead the Trump Administration’s Department of Government Efficiency (DOGE), posted a poll on IRS funding on X, shortly after the Deputy Secretary’s remarks.
One of the options was that funding should be “deleted.”
So far, President-elect Trump has said little about his plans for the IRS, other than his team telling MarketWatch that he wants to avoid IRS “overstepping.”