Big Improvements Are Coming to the IRS. Here's What You Need to Know

It's positive news for taxpayers.

There's a reason that for the past number of years, you potentially had a better chance of getting your favorite celebrity on the phone than connecting with an IRS agent. Similarly, there's a reason IRS audit rates have been remarkably low in recent years. The agency has lacked the manpower needed to pursue questionable tax filings.

But all of that may soon be changing. Last year, as part of the Inflation Reduction Act, the IRS was granted $80 billion in funding. And Mark Steber, Chief Tax Information Officer at Jackson Hewitt, insists that's a very good thing.

The agency sorely needs funding

The IRS is an agency that's notoriously difficult to contact. That's largely stemmed from funding issues. In 2020, the IRS closed its field offices in the wake of the COVID-19 pandemic and fell almost unreasonably behind on processing paper documents and tax returns. As a result, many taxpayers had to wait longer than usual to see their refunds hit their bank accounts. Again, that's a situation that would have perhaps been remedied with more funding.

Thankfully, the IRS is finally getting the pile of cash it's needed for years to improve its services on a whole. And while some people might worry that an increase in funding will lead to more tax returns being audited, Steber says that shouldn't be a concern.

"The audit rate has been about 1% for decades, so your chance of being audited historically has been very low," he explains. Now, Steber does think audit rates will increase in light of this funding. But, he says, that's not necessarily a bad thing. And he also likes to remind people that if they're honest on their tax returns, that's not something to worry about.

"If you've done your tax return accurately and you have good documentation, an audit is nothing more than someone asking to see some support," he explains. And, it's possible for an audit to work out in your favor -- meaning, an audit might result in a lower tax bill than what you initially calculated, not a higher one.

A positive development

While added funding could lead to an uptick in audit rates, Steber thinks taxpayers should focus on the positive aspects of the IRS getting more money. "In the coming years, the IRS will have better technology, more staff," he says. That could mean shorter wait times to speak to an agent and less frustration for taxpayers.

Plus, it's good for the IRS to have money it can sink into training. That way, when you do manage to reach an IRS agent, they'll be more likely to actually be able to help you. After all, there's nothing more frustrating than waiting on hold for hours or calling repeatedly, only to finally reach a live person but not actually manage to resolve the issue you're calling about.

All told, extra money going into the IRS is a good thing. "You want a well-funded, well-trained, well-staffed IRS," says Steber. "It can be a benefit to all tax-paying Americans."