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The 87,000 figure includes hires across the agency, including IT and taxpayer services, not just enforcement staff as the claim suggests. And many of those hires would go toward holding staff numbers steady in the face of a history of budget cuts and a wave of projected retirements.
Projections of over 700,000 new audits of modest income filers are based on flawed assumptions, and run counter to the strategy the IRS plans to follow.
The Treasury Department says people and small businesses making under $400,000 per year will see no change, while audits of corporations and high net-worth individuals will rise.
The Democrats’ tax and spending bill, called the Inflation Reduction Act, has about $80 billion over 10 years for the IRS to boost collections by $204 billion. Among other purposes, the agency says it will use the money to target high-income earners and corporations.
House GOP leader Kevin McCarthy, along with many other Republicans, say otherwise.
"Democrats' new army of 87,000 IRS agents will be coming for you — with 710,000 new audits for Americans who earn less than $75k," McCarthy tweeted Aug. 9.
McCarthy’s office didn’t get back to us to explain where he got his numbers, but they are misleading.
This 87,000 figure comes from a May 2021 Treasury Department assessment of how it would use $80 billion to improve IRS operations. The report said the IRS would add 86,852 new full-time positions. (The plan is not written in stone. The Treasury Department says that in the coming months, it will decide how to allocate the new money.)
But even in the 2021 plan, not all of the hires would be auditors, or work in enforcement. The report said the money would go toward many things, including "hiring new specialized enforcement staff, modernizing antiquated information technology, and investing in meaningful taxpayer service."
Although the agency’s staff would increase, it’s key to note that over half of the IRS workforce is close to retirement. The plan was created with that exodus in mind and aims to hire thousands of people to simply maintain current levels. Today, the IRS has about 80,000 employees.
"The IRS will lose about 50,000 people over the next five or six years," said Natasha Sarin, Treasury’s counselor for tax policy and implementation. "A lot of this hiring is about replacing those people."
Sarin said another factor makes the 87,000 figure less than it appears to be. The agency’s projection of new hires was based on the idea that if things stayed as they were, another decade of business as usual would result in staff cuts. Over the past decade, the IRS has seen its funding drop by 20%. Between 2010 and 2018, the number of enforcement personnel fell by nearly a third. If that trend continued, the IRS would not only be replacing people lost to retirement, but to expected budget cuts.
So, the 87,000 wasn’t exclusively for people on the enforcement side, and it wasn’t all going to boost the overall size of the IRS workforce.
U.S. Rep. Kevin Brady of Texas, the top Republican on the House Ways and Means Committee, appears to have been the first to cite the 710,000 figure. Brady arrived at the number by bringing together two pieces of data.
In 2021, the Congressional Budget Office said that $80 billion more for the IRS would "return audit rates to the levels of about 10 years ago."
Brady took the audit rates of 2010 and applied them to the number of tax returns in 2018 — broken down by income groups. Using his approach, there would be about 710,000 more audits for filers reporting less than $75,000 in income.
But the approach ignores several key details about what the CBO report says in full and what the bill — and the Treasury — have made clear: This effort is intended to increase audits of corporations and high net-worth individuals.
The full sentence in the CBO report that Brady was drawing from said the audit "rate would rise for all taxpayers, but higher-income taxpayers would face the largest increase." Brady took a broad statement and applied it across the board to all income groups.
Brady also failed to note a key difference between the CBO assessment from a year ago and the bill under consideration today. The CBO assumed in its report that $60 billion of the $80 billion would go toward enforcement. But the current bill would result in substantially less than that — $46 billion — for enforcement, according to a Congressional Research Service analysis. With nearly a third less money, the number of resulting audits likely would also be less than one would expect based on the CBO report.
Sarin also noted that some of the people who report little or no income are high-income earners who have gamed the system to drive their tax bill as close to zero as possible.
Perhaps most important however, Brady’s projection runs directly counter to the stated policy of the IRS. Treasury Secretary Janet Yellen laid out the agency’s policy in a letter to IRS commissioner Charles Rettig.
"I direct that any additional resources — including any new personnel or auditors that are hired — shall not be used to increase the share of small business or households below the $400,000 threshold that are audited relative to historical levels," Yellen wrote Aug. 10.
That wasn’t new information. Rettig said the same thing in an Aug. 4 letter to Congress.
Audit rates for filers reporting less than $75,000 have held steady over the past several years at about 0.4%. In contrast, in 2011, the audit rate was more than double at 1%.
Yellen said enforcement will focus on corporations and people with high net-worth. Auditing them requires staff with special skills. Today, she said, the agency is only able to audit about 7,500 out of 4 million such returns each year.
Sarin at the Treasury Department said the number of audits will rise, but more of them will be at the high end of the income distribution and fewer at the low end. The logic is simple, she said. That’s where the money is. The top 1% of earners, she said, account for about 30% of the $600 billion each year that is owed but goes uncollected.
This would be a turnaround for the IRS. Historically, it has targeted some of the lowest earners, largely households who file for the Earned Income Tax Credit. There’s no guarantee that the agency will adhere to the new policy it has announced, but there’s no guarantee that it won’t.
McCarthy said an "army of 87,000 IRS agents will be coming for you — with 710,000 new audits for Americans who earn less than $75k."
The IRS has indicated it plans to increase its staffing and enforcement. But the 87,000 figure is flawed because not all of those employees would work in IRS enforcement, and not all of them would be new workers added to the overall workforce. Some hires would maintain staffing levels that would have fallen if past trends of budget cuts continued.
The 710,000 audit estimate runs counter to the stated policy of the IRS and is based on a flawed use of a CBO estimate that assumed much higher spending on enforcement than is in the current Democratic bill.
We rate this claim Mostly False.
Kevin McCarthy, tweet, Aug. 9, 2022
Congressional Research Service, IRS-Related Funding in the Inflation Reduction Act, Aug. 9, 2022
Congressional Budget Office, Estimated Budgetary Effects of H.R. 5376, the Inflation Reduction Act of 2022, Aug. 5, 2022
Kevin Brady, Brady on Manchin-Biden Bill: Attention Wal-Mart Shoppers–More IRS Audits Headed Your Way, Aug. 6, 2022
Congressional Budget Office, The Effects of Increased Funding for the IRS, Sept. 2, 2021
Congressional Budget Office, Trends in the Internal Revenue Service’s Funding and Enforcement, July 2020
IRS, IRS 2021 data book, accessed Aug. 10, 2022
IRS, IRS data book: Compliance Presence, accessed Aug. 10, 2022
U.S. Treasury Department, The American Families Plan tax compliance agenda, May 2021
U.S. Treasury Department, Sec. Yellin letter to IRS Commissioner Rettig, Aug. 10, 2022
Internal Revenue Service, Updated IRS audit numbers, May 26, 2022
IRS Commissioner Rettig, Letter to the U.S. House of Representatives, Aug. 4, 2022
National Bureau of Economic Research, Tax Evasion at the Top of the Income Distribution: Theory and Evidence, March 2021
TRAC, IRS Continues Targeting Poorest Families for More Tax Audits During FY 2022, March 29, 2022
GAO, Trends of IRS Audit Rates and Results for Individual Taxpayers by Income, May 17, 2022
U.S. Treasury Department, The Case for a Robust Attack on the Tax Gap, Sept. 7, 2021
Internal Revenue Service, IRS Budget & Workforce, May 26, 2022
Washington Examiner, 86,852 new IRS employees, Aug. 8, 2022
Government Executive, Some Specifics Emerge on How the Senate-Backed Tax-and-Climate Bill Would Impact Agency Staffing Levels, Aug. 8, 2022
Associated Press, GOP skews budget bill’s impact on IRS, taxes, Aug. 10, 2022
New York Times, The I.R.S. says new funding won’t mean more audits for middle-income Americans., Aug. 4, 2022
Interview, Natasha Sarin, counselor for Tax Policy and Implementation, U.S. Treasury Department, Aug. 10, 2022
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