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1 1 (June 2, 2023)

handle is hein.crs/govelvm0001 and id is 1 raw text is: Congressional Research Service informing the legislative debate since 1914 Updated June 2, 2023 The Internal Revenue Service's Strategic Operating Plan to Spend $79 Billion in Inflation Reduction Act Funding The Inflation Reduction Act (IRA, P.L. 117-169) provided the Internal Revenue Service (IRS) with $78.9 billion in mandatory funding that is available for obligation through FY2031. Of this amount, the act specified that $45.6 billion (58%) would go to tax law enforcement, $25.3 billion (32%) to operations support, $4.8 billion (6%) to the IRS's business systems modernization (BSM) program, and $3.2 billion (4%) to taxpayer services. Shortly after the IRA's enactment, the Department of the Treasury promised to deliver to Congress by mid-February 2023 a report detailing how the IRS intended to use the IRA funding. The report, delivered April 6, 2023, sets forth five key objectives for using the funds and a variety of initiatives and projects for accomplishing them. This In Focus looks at the IRS's strategic operating plan's (SOP's) objectives and how the IRS intends to achieve them. It also discusses potential obstacles to realizing the objectives. Objective I: Provide Taxpayers with the Prefiling Services They Want and Need The IRA provided $3.2 billion for IRS taxpayer services such as filing and account services, prefiling assistance, and education. This funding is intended to allow the IRS to make substantial improvements in how it interacts with taxpayers who have questions about their tax obligations. The IRS answered between 18% and 19% of taxpayer calls during the 2020 and 2021 filing seasons, down from 59% in 2019. Under the SOP, the IRS intends to expand digital options that would let taxpayers and tax professionals receive support in their preferred medium-digitally, by phone, or in person. Taxpayers would also have more options to prove their identities, allowing them to access more services without needing to reconfirm. More tax forms could be filed digitally. As part of the IRA, the IRS is also exploring the feasibility of creating a direct-file tax preparation service. According to the SOP, the IRS plans to put all of a taxpayer's interactions and tax history in a centralized information system, which would enable staff to respond to taxpayers' questions more knowledgably. To improve ease of use for taxpayers, transcripts and taxpayer account data would be written in plainer language and available in languages besides English. Planned improvements in information systems would also enable taxpayers to track the status of their returns, refunds, audits, and other interactions with the IRS in real time; to make more payments digitally; and to expand online account services for businesses and tax professionals. In addition, the IRS plans to offer legal guidance to taxpayers on more questions, including clarifying ambiguities in the tax code that can cause taxpayer error and encouraging those who are eligible for tax credits and deductions to claim them. There are some signs that the IRS is making progress in its IRA-funded efforts to improve taxpayer services. The agency claimed it answered 87% of taxpayer calls during the 2023 filing season, thanks to the hiring of 5,000 customer service representatives using IRA funds. Further success could depend, in part, on whether the IRS can hire, train, and retain qualified individuals and integrate certain planned improvements in its business information systems with new taxpayer service options in a timely fashion. Objective 2: Quickly Resolve Taxpayer Issues According to the SOP, the IRS plans to use some of the IRA funds for taxpayer services to make its efforts to resolve taxpayer issues timelier. Recent backlogs in responding to taxpayer correspondence have increased the pressure on the IRS to streamline its case resolution processes. The IRS had 2 million pieces of correspondence awaiting a response at the end of the 2019 tax-filing season. For reasons mainly related to the COVID-19 pandemic, the backlog grew to 5.9 million pieces at the end of the 2021 season. The IRS had reduced the backlog to 4.5 million pieces as of November 2022. According to a 2021 Taxpayer Experience Survey conducted by the IRS, nearly 60% of respondents reported that they had an issue that required IRS assistance to resolve but had trouble reaching anyone at the agency. With the IRA funding, the agency hopes to expand prefiling assistance programs. This could include identifying issues with taxpayers' filings-such as missing forms, math errors, or missing income reported by third parties-and notifying taxpayers or preparers about how to resolve the issues. Doing so could prevent many taxpayers from having to file an amended tax return. The SOP also specifies that the IRS intends to make greater use of data analytics to help the agency better tailor its taxpayer services. Areas in which the IRS says it intends to apply more advanced analytics include recognizing and

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