The Internal Revenue Service (IRS) has reported a near-record revenue of $4.7 trillion from American taxpayers in the last fiscal year. This significant increase in revenue has resulted in higher tax refunds, which were boosted by 3 percent compared to the previous year. The IRS’s annual Data Book for fiscal year 2023 reveals that despite a slightly lower collection amount than the record-breaking $4.9 trillion in the 2022 fiscal year, the agency has managed to keep its pledge of not increasing audit rates for individuals earning less than $400,000 per year.
The IRS attributes the substantial tax intake to a funding boost of $78 billion provided by the Inflation Reduction Act of 2022. This funding allowed the IRS to hire more enforcers and implement advanced technologies like artificial intelligence to target non-compliant taxpayers. The agency has made significant progress in developing innovative approaches to identify and address potential noncompliance, leveraging new technology and data analytics to fairly enforce tax laws.
Initially, many Republicans opposed the funding boost, expressing concerns that it would result in the hiring of an excessive number of tax enforcers who would burden ordinary Americans. However, the IRS has reassured the public that audit rates for individuals making less than $400,000 per year would not increase. Critics have questioned the feasibility of this promise, as the IRS currently relies on outdated income thresholds and lacks a comprehensive method to identify taxpayers meeting the $400,000 criterion. Nevertheless, the IRS maintains that it has successfully kept its pledge.
To support its increased enforcement efforts, the IRS expanded its workforce by approximately 5 percent last year. This expansion included the addition of around 5,800 new employees, primarily dedicated to compliance activities aimed at generating more tax revenue. In 2023, 40 percent of the IRS’s 82,990 full-time staff were involved in enforcement activities such as tax return examination, collection of outstanding balances, and settlement of taxpayer appeals.
The agency also increased its spending on enforcement, allocating more funds to examinations and collections. The IRS intensified its focus on high-wealth non-filers and individuals who underreport their tax liability through complex schemes. These efforts, combined with the added hiring and funding boost, allowed the IRS to process a total of 271.4 million tax returns and other forms in 2023. Of these, over 163.1 million were individual income tax returns. The agency paid out $659 million in tax refunds, representing a 2.7 percent increase compared to the previous year.
Looking ahead, a recent report from the Treasury Inspector General for Tax Administration (TIGTA) indicates that the IRS plans to hire thousands more tax enforcers in 2024 to further boost tax revenues. The report reveals that the agency intends to hire a total of 5,582 tax enforcers across three staffing categories: revenue officers, revenue agents, and special agents. The majority of the new hires will be revenue agents responsible for conducting face-to-face tax audits of complex returns. The IRS plans to hire 4,663 revenue agents, bringing their total number to 12,358.
Additionally, the IRS will onboard another 517 staff members in the collection function, tasked with collecting delinquent taxes and securing delinquent returns. The agency also plans to hire 402 armed special agents in the criminal division. However, it is important to note that the claim of an “army of 87,000” tax enforcers is unfounded, as stated by the TIGTA. Only special agents in the Criminal Investigation Division are armed, and they represent the smallest number of staff among all IRS enforcement personnel.
The increased revenue and higher tax refunds reported by the IRS highlight the success of their enforcement efforts and the impact of additional funding and hiring. The agency’s commitment to not increasing audit rates for individuals earning less than $400,000 per year has been upheld, despite criticism and concerns. With the IRS’s continued focus on compliance and the expansion of its workforce, taxpayers can expect a continued effort to ensure fair enforcement of tax laws and an improved taxpayer experience supported by advanced technologies.
