Most People Think Increasing Funding to the IRS Is a Bad Idea. Here’s Why They’re Wrong

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Think additional IRS funding is a problem? Read on to see why you’re wrong. 

There’s a reason IRS audit rates have been so low in recent years. The IRS has been sorely underfunded for a really long time. As a result, the agency has been forced to limit its audits because it simply lacks the manpower to conduct more.

That may soon be changing, though. As part of last year’s Inflation Reduction Act, the IRS was awarded $80 billion in funding. And while some of that money is apt to go toward addressing the agency’s staffing needs, a portion will also be earmarked for enforcement — meaning, making sure taxpayers are actually reporting all of their income and paying the IRS accordingly.

At first, this increased funding might seem like a bad thing in your mind. And if so, you’re not alone. But actually, a well-funded IRS really does have the potential to benefit taxpayers as a whole.

Most people aren’t happy with an uptick in funding

Financial guru Graham Stephan tweeted a poll last year that said “There has been a lot of noise regarding increasing budget to IRS. Fundamentally, do you think it’s a good idea in the long run?”

Surprisingly, only 30.1% of respondents said yes, while 69.9% said no. And it’s easy to see why.

The idea of an IRS audit can be scary. And so many people are probably worried that if the agency gets more funding, their chances of getting audited will rise.

But that’s by no means a guarantee. And also, one thing you should know is that if you’re honest on your tax return, that alone might minimize the chances of the IRS asking to take a closer look.

What’s more, even if you do end up getting audited, often, all that’ll happen is that the IRS will send you a letter in the mail asking for more information or proposing a change to your most recent tax return. Responding with said information or agreeing to the proposed change might settle the matter in a painless fashion.

So, let’s say you earned $200 of interest in your savings account last year, only you forgot to report it on your tax return. If the IRS has a record of that interest income, it might audit you in the form of sending you a letter asking to adjust your tax return to reflect that missing income. Say yes, and the matter is basically closed.

Why you should want more IRS funding

While nobody wants to see audit rates go up, the reality is that pumping more money into the IRS is an important thing. These days, the simple act of getting in touch with an agent over the phone can be harrowing due to lengthy wait times. If the IRS is able to boost its staff, those wait times might shrink substantially.

Also, the IRS has been notoriously slow to process paper returns in recent years, leading to delays in issuing tax refunds. If staffing increases, the agency should be able to process those returns more quickly. The result? Tax-filers won’t have to wait as long for their refunds to hit their bank accounts.

All told, there’s lots to be gained from a well-funded IRS. So rather than bemoan the agency’s influx of cash, remember that a lot of that money can be used to make the taxpayer experience more positive on a whole.

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