House Democrats propose $78B in new IRS funding
NS Biden The administration defended its plan to increase funding for the IRS by about $80 billion, arguing in a memo to congressional Democrats that the extra money would help the agency crack down on wealthy tax dodgers and recover billions in lost revenue. Can do.
“President Biden’s plan will give the IRS the resources and information needed to increase enforcement against the highest income tax fraud while Americans earning less than $400,000 a year,” the White House said.
The memo comes after House Democrats on Monday released a draft of a proposed tax increase, which includes providing the IRS with an additional $78 billion in funding for enforcement measures. But the White House also wants to give the agency more power over the next decade to crack down on tax evasion by high earners and corporations — a move that has prompted a swift response from Republicans.
The Tax-Writing Methods and Means Committee did not include any new bank reporting requirements in the revenue blueprint.
The administration said in the memo that Biden’s plan includes requiring banks and financial institutions to provide “a little bit of high-level information” on account flows to the IRS so that the agency can learn more about the earnings of wealthy Americans from investments and business. information can be obtained. activity.
It warned that banks would not have to report individual transactions to the IRS, but “basic, high-level information on account inflows and outflows.”
“Imagine a taxpayer who reports income of $10,000, but has $1 million flowing into his bank account,” the memo said. “Having this summary information will help flag to the IRS when people with higher incomes tend to under-report their income (and overpay their tax obligations).”
Money generated from the plan will be used to fund Democrats’ comprehensive $3.5 trillion spending package, which will dramatically expand the social safety net.
In fiscal 2019, the IRS audited just 0.45% of individual tax returns, according to the Treasury Department recently report good, or roughly 1 out of every 225 individual returns. This figure is down from 0.59% in 2018 and 1.11% in 2010. Data shows that out of more than 199 million tax returns in 2019, the IRS examined only 771,095 returns. This is a decline of 44% from FY20.
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Overall, the IRS collected approximately $57.5 billion in enforcement revenue in fiscal 2019, which ended September 30, 2019. That’s down from $59.4 billion during fiscal 2018, according to Treasury data.
The decline in audits is largely due to decreased funding and enforcement staff: the IRS has 20,000 fewer employees than in 2010, and its budget is about $11.4 billion – 20% less than in 2010, when adjusted for inflation. According to the Congressional Budget Office.
IRS Commissioner Chuck Rattig previously said that nearly $1 trillion in federal taxes may not be paid because of errors, fraud and a lack of resources to adequately enforce collections.
This is well above the last time the IRS formally published figures on the so-called tax gap; At the time, between 2011 and 2013, the agency reported an annual loss of approximately $441 billion.
If the changes were implemented, Ratig estimated that IRS employment would increase to about 167,000 (compared to about 81,000 in 2020), while the agency would have “to improve the taxpayer experience and access to additional reporting information.” The necessary resources will be to invest in critical technology. Increase compliance in areas where we currently lack information.”
“The new data will provide the IRS with a lens into otherwise opaque sources of income with historically low levels of reporting accuracy,” Ratig said.