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IRS opting for 'soft notices' instead of auditing working class

The IRS plans to use new funding for enforcement, among other things, but vowed not to increase audits on Americans making under $400,000 a year.
IRS opting for 'soft notices' instead of auditing working class
Posted at 10:56 AM, Apr 07, 2023

The IRS released details Thursday on how the agency plans to use $80 billion in funding from the Inflation Reduction Act passed by Congress last year. Of that amount, the Congressional Budget Office estimates that $60 billion will be spent on enforcement.

The report comes from new IRS Commissioner Daniel Werfel, who was sworn into the post on March 13. 

The report highlights improvements to customer service after taxpayers complained in recent tax seasons about contacting the IRS for questions. 

Werfel vowed not to increase audits on Americans making under $400,000 a year. Republicans have claimed that despite clear directives from the White House, the IRS would use newly hired agents to increase enforcement on those in the working class. 

Sen. Mike Crapo, R-Idaho, has pushed for a limit on audits on those making below $400,000, but as ranking member of the Finance Committee, he said he has been unable to garner Democratic support to codify the commitment.

SEE MORE: These are the most common tax filing mistakes

The IRS is working to hire 87,000 new employees.

“Our efforts outlined in the Plan to provide better service to taxpayers, help them file accurately and resolve issues at filing, coupled with technology and data advances, will allow us to focus enforcement on taxpayers trying to avoid taxes, rather than taxpayers trying to pay what they owe,” Werfel said.

Werfel said part of that process will be implementing a “soft notice” program. He said rather than sending taxpayers through an audit process when mistakes are made on tax forms, he said the IRS will work with filers to quickly correct the mistake. 

“Notification could start with a soft notice, for example, and move to an audit if no action is taken or the issue remains unresolved. This approach will give taxpayers who want to comply with simpler ways to correct issues identified after filing and help to prevent unnecessary audits,” the report states.

SEE MORE: Why are tax refunds smaller this year?

Crapo said he is concerned the IRS “will waste untold taxpayer dollars chasing speculative or marginal revenue recoveries, while hardworking Americans and small businesses end up in a dragnet.”

Werfel noted that the IRS has been “significantly underfunded” for years. He said the IRS has experienced a 22% reduction in funding from 2010 through 2021. 

“This lack of investment has led to low levels of service, paper-based processes, antiquated technology, and an overall experience for taxpayers that falls short of what we want to deliver,” he said. 

Werfel said the IRS is in the process of hiring 650 to handle calls at its Taxpayer Assistance Centers. The IRS is also working on giving taxpayers the option to upload documents digitally in response to many IRS notices.