Social media users are claiming that the new Inflation Reduction Act approves $80 million in funding for the recruitment of 87,000 Internal Revenue Service (IRS) agents and say this will lead to further taxation of the middle class. The posts are missing context, however: U.S. Department of the Treasury and IRS said that these positions are for staffing of various roles, and multiple sources have said the agency would not increase its focus on people earning under $400,000.
Examples can be seen (here), (here) and (here). One tweet reads, in part, “Lower to middle income Americans & small businesses will be the primary targets of Democrat’s new IRS force.”
The $430 billion U.S. Inflation Reduction Act is intended to lower healthcare costs, promote clean energy and increase corporate taxes at a time when inflation is at its highest in decades. A Reuters explainer about the legislation can be seen (here).
VOX reported (here) that the commonly quoted 87,000 number appears to come from a May 2021 report by the Department of Treasury (here), which estimated that the IRS could hire 86,852 employees with almost $80 million more funding by 2031. The exact number of employees to be hired is not yet known.
A Treasury official told Reuters that most of the new hires would go toward filling positions for 50,000 IRS employees who are on the verge of retirement and that the majority of net new hires would serve in customer service roles like upgrading IT systems or answering calls.
Indeed, one piece of key context missing from social media posts is that this number budgets for an array of positions – not just auditors.
Terry Lemons, Communications and Liaison Chief at the IRS, told Reuters via email: “In reality, the proposal would hire a variety of people across the agency to support not only enforcement but taxpayer service and technology improvements.”
Context that is also crucial to these posts is that Treasury reps have repeatedly said audit scrutiny would not increase relative to recent years for those making less than $400,000.
In one example, on Aug. 4, 2022, IRS Commissioner Charles P. Rettig sent a letter (here) to members of the U.S. Senate saying: “These resources are absolutely not about increasing audit scrutiny on small businesses or middle-income Americans. As we've been planning, our investment of these enforcement resources is designed around the Department of the Treasury's directive that audit rates will not rise relative to recent years for households making under $400,000.”
Rettig added: “Other resources will be invested in employees and IT systems that will allow us to better serve all taxpayers, including small businesses and middle-income taxpayers. Enhanced IT systems and taxpayer service will actually mean that honest taxpayers will be better able to comply with the tax laws, resulting in a lower likelihood of being audited and a reduced burden on them.”
On Aug. 10, 2022, Secretary of the Treasury Janet L. Yellen sent a letter with similar assurances to Rettig in support of the funding (here).
Yellen wrote that the act “includes much-needed funding for the IRS to improve taxpayer service, modernize outdated technological infrastructure, and increase equity in the tax system by enforcing the tax laws against those high-earners, large corporations, and complex partnerships who today do not pay what they owe.”
Yellen also says in the letter that “audit rates will not rise relative to recent years for households making under $400,000 annually.”
“Instead, enforcement resources will focus on high-end noncompliance,” Yellen wrote.
J. Mark Iwry, former senior advisor to the Secretary of the Treasury, Nonresident Senior Fellow at the Brookings Institution and Visiting Scholar at the Wharton School of the University of Pennsylvania, told Reuters that “the IRS currently audits individuals on all income levels but has lacked resources to focus on those with high levels of income.”
“Reversing years of underfunding the IRS will help all Americans, the vast majority of whom are law abiding citizens who pay their taxes,” Iwry said. “They are entitled to know that IRS will finally have the tools to help make sure wealthy, sophisticated taxpayers and corporations pay their taxes too.”
“The Administration has committed to not using the new funding to increase audit rates for those earning under $400,000 a year,” he said.
Some news reports quoted the Congressional Budget Office as saying audits of those making under $400,000 account for a revenue of $20 billion (here) (here). The articles mention an amendment proposed by Sen. Mike Crapo that wanted to prevent the IRS from using any of the new funding for audits on “individuals and small businesses, with taxable incomes below $400.000.” (here)
Social media users expressed concern that this amendment meant audits would target those making under $400,000 (here).
The new funding, however, also serves to replace retiring IRS workers, for example, and the IRS never said it would stop auditing those making under $400,000 – rather, that it would not increase audit rates relative to past years for this group.
Missing context. While the Inflation Reduction Act budgets to hire new workers for the IRS, the Treasury has said these roles would fill a broad range of agency needs and “that audit rates will not rise relative to recent years for households making under $400,000.”
This article was produced by the Reuters Fact Check team. Read more about our fact-checking work here .
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