ROCHESTER, N.Y. (WROC) — The Inflation Reduction Act, recently signed by President Biden, has many asking questions about what this means for their taxes.
The legislation provides $80 billion to the IRS, with more than half of the new dollars going toward additional tax enforcement.
News 8’s Ally Peters spoke with Garrett Wagner, a CPA with the New York State Society of CPAs, about what this means for taxpayers.
With this additional money, should our viewers be concerned the IRS is going to audit them or look more closely at their return now?
“I want to put everyone’s mind at ease. That’s just an incredibly common misconception,” Wagner said. “When we look at the IRS, it’s one of the most underfunded, understaffed and lagging behind the technology units of the government, and all of those things greatly negatively impact all of us. The reason the IRS still has 10s of millions of unprocessed tax refunds is they’re just totally understaffed.”
Wagner said this new money is allocated to help fund the IRS so they can do their “most basic job” and get taxpayers their refunds more quickly after they’re filed.
“There is a small portion allocated to enforcement and it’s really targeted for high-income corporations and for the Top 1% of taxpayers, which according to most reports, tax evasion amongst this group is at an all-time high, so they want to curb that tax evasion more than anything,” Wagner said.
What does the Inflation Reduction Act provide funding for the IRS to do aside from increasing that enforcement?
“One of the biggest areas that provide funding is just for additional IRS employees, which has been a major cause for delay. Anybody out there, and I know this pain myself, that’s ever tried to call the IRS, it’s not uncommon to spend days on hold to try and get a hold of somebody because they’re that understaffed,” Wagner said.
According to the Treasury Department, the funding will allow the IRS to hire roughly 87,000 workers over the next decade.
Some money will also go to investment in technology.
“The IRS currently functions, from a technological standpoint, almost the same as they did in the 70s and 80s. It’s kind of scary if you’ve read some of those reports, so funding for technology for the IRS to get them, let’s say up to the 1990s, is greatly needed,” Wagner said.
What, if anything, should people be worried about when it comes to increased IRS scrutiny?
“That’s a common misconception. For most of us there, if you forget to report your W2 or income, the IRS can just match that up and say that forms missing, and they’re gonna send you a letter,” Wagner said. “And nowadays, with a higher itemized deduction threshold, very few of us are reporting additional numbers that aren’t supported by an official government document. So our audit risk is very, very low.”
Wagner adds, “At the end of the day, the IRS is not going to come knocking on your door due to the inflation Reduction Act, but perhaps you might actually get your refund sooner, which would be a nice benefit to all of us.”
The Inflation Reduction Act was signed by President Biden on August 16. The IRS’s $80 billion is expected to be spent over the next decade.
To contact a CPA or to learn more about the Inflation Reduction Act, you can click here.