IRS to spend just 4% of $80B funding on customer service despite pledge to help taxpayers

The IRS isn’t putting its money where its mouth is after the agency pledged to improve customer service for taxpayers following an infusion of cash.

Of the $80 billion windfall the IRS will rake in from the Inflation Reduction Act, just $3.2 billion — or 4% — will be spent on improving taxpayer service. In contrast, $46 billion — or 58% of the new money — will be devoted to enhancing “monitoring and compliance.”

The paltry figure for customer service seems to fly in the face of a vow made by one Treasury Department official.

“Taxpayers should expect a significantly higher level of service in the next filing season,” the Treasury official told the Wall Street Journal on Friday.

The emphasis on improved customer service comes as the White House and Democrats face backlash over worries the IRS will end up targeting working-class families and small businesses as part of its efforts to raise revenue.

The $3.2 billion appropriated to helping taxpayers wade through the complicated tax code is unlikely to keep pace with the massive increase in audits. An analysis by the nonpartisan Congressional Budget Office estimates those earning less than $400,000 — the group on which Biden promised not to raise taxes — will pay an estimated $20 billion more in taxes over the next decade as a result of the Democrat-pushed, $740 billion package, which set aside $80 billion to hire 87,000 IRS agents.

Likewise, small businesses will be hit hard by the provision that aims to improve the agency’s collection of under-reported income. According to nonpartisan watchdog the Joint Committee on Taxation, between 78% and 90% of the estimated additional $200 billion the IRS will collect will come from small businesses making less than $200,000 annually.

The White House has dismissed claims the bill will hurt lower- and middle-income Americans, instead noting estimates don’t take into account how much the bill will offset costs for average Americans like prescription drugs.

But Treasury Secretary Janet Yellen has acknowledged the new and improved IRS could ramp up collections from middle-class taxpayers. In a letter to the IRS commissioner last week, Yellen directed “any additional resources … shall not be used to increase the share of small business or households below the $400,000 threshold that are audited relative to historical levels.”

Her edict didn’t hold much water with tax experts.

“The IRS will have to target small and medium businesses because they won’t fight back,” adds Joe Hinchman, executive vice president at National Taxpayers Union Foundation. “We’ve seen this play out before … the IRS says ‘We’re going after the rich’ but when you’re trying to raise that much money, the rich can only get you so far.” 

Daniel Bunn, executive vice president at the Tax Foundation, told The Post: “Anytime you get an IRS letter, it could take months or years to get it settled — we’re talking many thousands of dollars to address. Large companies have constant reviews and lawyers going through everything … small business doesn’t have the resources to fight back in the same way.”