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As The Tax World Turns: The IRS Funding Rollercoaster

Jose Ortiz, CPA, CTC
The IRS Funding Rollercoaster: A wild ride of promises, pushback, and taxpayer frustration. Buckle up as we break down the drama in As the Tax World Turns!
The IRS Funding Rollercoaster: A wild ride of promises, pushback, and taxpayer frustration. Buckle up as we break down the drama in As the Tax World Turns!

A Bold Start with Big Promises


In 2022, the Inflation Reduction Act handed the IRS an $80 billion funding boost spread over a decade. The plan was ambitious:


  • Update outdated technology (yes, the IRS still relies on systems older than most of us).

  • Hire tens of thousands of agents to focus on enforcement, particularly targeting high-income tax evasion.

  • Close the tax gap—an estimated $496 billion in unpaid taxes each year.


The intent? A more modern, efficient IRS that could better serve taxpayers while holding major tax dodgers accountable. But as you might expect, it didn’t take long for concerns to bubble up.


Critics claimed this was less about efficiency and fairness and more about overreach. Rumors of “87,000 new agents coming after small businesses and gig workers” quickly took on a life of their own, fueling fears that ordinary taxpayers, not the wealthy, would be under the microscope.


The Pushback Takes Hold


By 2023, the funding became a political lightning rod. Concerns from both critics and skeptics boiled down to a few key questions:


  • Will this lead to more audits for middle-class taxpayers?

  • Why give the IRS more money when they can’t even keep up with phone calls and processing times?


With a Republican-controlled House, pulling back that $80 billion became a top priority. Suddenly, what was intended to modernize tax enforcement became the center of a budget standoff.


The Plot Thickens


In December 2024, the battle over funding hit another milestone. To avoid a government shutdown, $20 billion of the IRS’s funding was paused. Some are now questioning whether the IRS will ever get the resources it was promised. Even former IRS Commissioner Charles Rettig has weighed in, expressing doubts about whether the remaining funds will be used as originally planned.

So, what does this mean for the average taxpayer or advisor in 2025?


What This Means for Taxpayers and Advisors


For taxpayers, this saga likely means more of the same frustrations:


  • Long wait times when trying to get through to the IRS.

  • Delays in processing returns, refunds, and amendments.


For tax advisors, the dream of improved IRS efficiency feels farther away than ever. Accountants are still enduring hours-long hold times, trying to resolve issues while managing stressed-out clients.


But perhaps the biggest concern is the ripple effect of scaled-back resources. Without the capacity to tackle complex cases, like billionaires shielding money offshore, the IRS might focus on more straightforward audits. Translation? Small businesses and self-employed individuals could face more scrutiny as the IRS looks for “easier wins.”


A Bigger Picture: Tax Fairness and Planning


This funding drama is about more than just money—it’s about the balance of enforcement, fairness, and service in the tax system. While political battles play out, taxpayers and advisors must focus on what they can control:


  • For taxpayers: Stay on top of compliance and be proactive about record-keeping.

  • For advisors: This is a critical moment to step up as a guide, helping clients avoid costly mistakes and navigate the ever-changing rules.


The Takeaway The tax world might feel like a soap opera, but this isn’t just a headline to scroll past. Whether you’re a high earner, business owner, or tax professional, the IRS funding saga impacts us all.


As this story unfolds, one thing is clear: planning and staying informed are more important than ever!


Stay Tuned for our Next Column


The IRS funding saga is just one plotline in the ever-evolving drama of the tax world. In the next installment of As the Tax World Turns, we’ll continue peeling back the layers, helping you make sense of the latest changes, challenges, and opportunities that impact you and your finances.


Got thoughts on the IRS funding cuts? We’d love to hear your perspective! Share your insights with us—we’re here to keep the conversation going and empower you with the knowledge to stay ahead.


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