In a recent federal budget move, Congress has officially slashed $20 billion in long-term spending for the Internal Revenue Service (IRS), stirring concerns over its impact on federal revenues and the deficit. The decision, embedded within the Further Consolidated Appropriations Act of 2024, signals a significant reduction from the initially allocated $80 billion over a decade, per the Inflation Reduction Act 2022.
The budget allocates $12.3 billion for fiscal year 2024, mirroring the previous year’s base budget. Among its components, $2.8 billion is earmarked for taxpayer services, $5.4 billion for enforcement, and $4.1 billion for operations support.
Former IRS Commissioner Charles Rettig expressed concerns over the substantial cut, highlighting the historical underfunding of IRS compliance efforts. Despite this setback, he remains optimistic about leveraging technological advancements to bolster IRS operations.
Notably, the budget agreement prohibits fund transfers to enforcement, a restriction not imposed under other circumstances. Utilizing funds from the Inflation Reduction Act, the IRS has focused enforcement efforts on high-income groups, including non-filers, corporate jet users, and millionaires owing taxes.
John Kelshaw, a seasoned tax professional, views the $20 billion cut as significant, albeit falling short of the initially proposed $80 billion. The Treasury declined to comment directly but emphasized the IRS’s continued capability to ramp up enforcement against non-compliant big corporations and wealthy taxpayers.
The $20 billion rescission disappoints Doreen Greenwald, president of the National Treasury Employees Union, who anticipated the move following last year’s debt limit deal.
The budget cut could have tangible implications for self-employed individuals, entrepreneurs, small businesses, and freelancers. With reduced IRS resources, the likelihood of increased scrutiny and enforcement actions against tax non-compliance remains a concern.
Moreover, the IRS’s ability to provide adequate taxpayer services, support, and guidance may need to be improved, impacting those navigating complex tax obligations.
Despite these challenges, small business and freelance community stakeholders are encouraged to remain vigilant, stay informed about tax obligations, and seek professional assistance to ensure compliance and mitigate potential risks associated with budgetary changes.
Source ( Journal of Accountancy News).
