How the IRS Will Use Funding from the Inflation Reduction Act of 2022

On August 16, 2022, President Joe Biden signed The Inflation Reduction Act of 2022 into law. One of the provisions of the legislation was the additional supplemental funding of $79.6 billion to the Internal Revenue Service (IRS) over the next ten years.

There has been speculation about what this will mean to taxpayers and how the funding will be used. There were reports that the IRS would hire another 87,000 employees in its criminal enforcement division with this additional funding. The figure of 87,000 employees comes from a May 2021 Treasury Department assessment of how the IRS could use an $80 billion appropriation over ten years. The IRS expects to lose more than 50,0000 employees between retirement and other departures over the next five years. We will review the departments and areas funded by the Inflation Reduction Act of 2022.

The supplemental funding to the IRS targets four key areas: Taxpayer Services, Enforcement; Operations Support; and Business System Modernization. The fiscal 2021 annual budget for the IRS was $13.7 billion, so this supplemental funding is almost six times the yearly budget.

Taxpayer Services

As part of the Inflation Reduction Act of 2022, $3,181,500,000 was allocated for taxpayer services. These funds will help with pre-filing assistance and education, filing and account services, and taxpayer advocacy services. In October, the IRS hired 4,000 customer service representatives with the expectation to hire another 1,000 by the end of the year.

With these additional hires, the IRS is anticipating being able to answer phone calls at a much higher rate during the 2023 tax filing season than the 19% and 18% of calls answered during the 2021 and 2022 seasons.


The area that has received the most attention for the additional IRS funding is the $45,637,400,000 allocated to enforcement. These funds aim at hiring more enforcement agents, litigation, and criminal investigation expenses, and investing in investigative technology.

With the additional enforcement funding, we expect to see more audits of high-wealth taxpayers, large corporations, and partnerships as the IRS hires and trains additional agents. When examining audit rate projections, the focus will be on taxpayers above a $400,000 taxable income threshold. The Congressional Budget Office estimates that the additional enforcement funding will generate $204 billion in revenues through 2031, although such estimates are highly uncertain.

Starting in 2023, the IRS will devote more time and resources to monitoring cryptocurrency and digital assets. Therefore, cryptocurrency brokers must report more information on their clients’ trading activity to the IRS.

Operations Support

Operational support will receive $25,326,400,000 over the ten years. The IRS will be funding IT development, telecommunications, facilities services, postage, security, research, rent payments, and maintenance as part of the operational support. With this additional funding of operational support, the IRS will be able to resolve taxpayer issues timely and make it easier to send automated notices to taxpayers.

Business Systems Modernization

$4,750,700,000 of funding for updating the systems in use at the IRS. A part of this update would be developing call-back technology to replace waiting on hold listening to music. The bill suggests that this funding is not used to operate and maintain legacy systems.

As you can see, the funding received from the Inflation Reduction Act of 2022 will impact many areas of the IRS. If you want more information on how these changes may affect you, please send us a message.

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