The IRS Isn't Hiring an 'Army' of Auditors. Here's How It's Spending $80 Billion

Since mid-2022, several politicians have warned Americans about a growing army of tax auditors, 87,000 to be exact. The only problem -- it's false. True, the IRS wants to hire new employees, using funds from the $80 billion allocated to it by the Inflation Reduction Act. But the IRS isn't mobilizing an army of 87,000 new auditors, nor does it plan to use all of that funding for hiring purposes alone. 

So what exactly does the IRS plan to do with $80 billion? Let's take a look at the plan it released in April 2023. 

The IRS wants to rebuild its staff

No one likes doing taxes. Not for themselves and apparently not for the IRS. 

As the New York Times pointed out, the IRS's total number of full-time employees in 2023 (roughly 80,000) is about 20% fewer than what the agency had in 2010, even though the U.S. population grew from roughly 309.32 million to 333.33 million in the same period. 

To bolster its numbers, the agency plans to use funding to hire roughly 20,000 new employees over the next two years, with roughly 7,239 of those hires being enforcement staff. This would add to the 5,000 phone personnel the agency hired before the 2023 tax season began. 

This is a far cry, however, from the claim that the IRS is hiring 87,000 auditors. That number was misappropriated from a report filed by the Treasury Department, which stated that an $80 billion investment in the IRS could lead the agency to hire 86,852 employees between 2022 and 2031. 

But this is just an estimate, not a policy goal. Moreover, a large portion of these employees would be hired to counterbalance those lost to attrition. For perspective, the IRS currently has about 80,000; if we included the 86,852 to be hired, the Treasury Department estimates the IRS would grow to roughly 110,000 employees by 2031. Not exactly the army of auditors certain politicians are expecting. 

Clamp down on tax evasion 

The second objective laid out in the IRS' plan is to stamp out Americans who are habitually underreporting income on their tax returns. 

The IRS has made it clear though that it doesn't intend to go after households and small businesses earning $400,000 or less, as some politicians have also claimed. Instead, the agency wants to hire more auditors to deal with complicated tax filings, which often come from wealthy individuals and large businesses. 

The audit rate on wealthy individuals has fallen from 16% in 2010 to roughly 2% in 2019. Part of the reason for this drop is that the IRS is operating with fewer tax auditors today than any time before World War II. To put that into perspective, consider the U.S. population in 1950 was 157.8 million, less than half what it is today. 

Increased funding to the agency, then, would help it hire more experienced auditors who can handle complicated tax filings. It could also help the agency close the annual gap between what is owed to it and what is collected, which is currently as wide as $163 billion. 

Update technology

Anyone who's visited the IRS's website understands the urgency of this objective: One look at it is all you need to realize the extent of its tech resource depletion. 

The IRS's plan for technology is ambitious but dare I say -- exciting. The agency wants powerful applications to let tax filers track the status of their filling online, with real-time updates and estimates on processing times. And all those long -- long -- hold times waiting for IRS personnel to take your call might be something we tell our grandkids: The IRS wants a robust messaging system that can help tax filers get answers to questions faster and with less hassle. 

The best part -- the agency wants to help taxpayers get the deductions and tax credits they deserve. Right now, the focus is on providing educational materials that break down deductions in plain language. Later, it wants to start using data analytics to identify taxpayers who are not claiming the deductions they are indeed eligible to claim. 

How will these changes affect you?

For most taxpayers, these changes will have no negative impact. If you're doing your best to file your tax returns accurately -- whether that's using the best tax software or hiring a tax professional -- the IRS's plan will likely make the process easier (finally!). Wealthy taxpayers earning $400,000 or more, however, will be scrutinized more closely. Again, as long you're not habitually underreporting income, you have nothing to worry about. If anything, the IRS's changes will bring more equity to the system, ensuring that all Americans pay their fair share of taxes.