IRS will target 'high-income' tax evaders with new funding, contrary to social media posts
The Inflation Reduction Act includes $79 billion for the IRS. Social media posts misleadingly claim the IRS will now hire “87,000 new agents” to investigate average citizens. But most new hires will provide customer services, and enforcement efforts will be aimed at “high-income and corporate tax evaders,” a Treasury Department spokesperson said.
President Joe Biden signed the Inflation Reduction Act — a climate, health care and tax package — into law on Aug. 16.
The legislation includes roughly $79 billion for the IRS over 10 years. The nonpartisan Congressional Budget Office projects that the enhanced IRS enforcement funded by the law will generate an additional $204 billion in revenue over 10 years. That represents additional taxes that are owed under existing laws, but which go unpaid.
Treasury Department officials say not all new hires will work on enforcement and increased revenues won’t come from middle-income earners. Treasury Secretary Janet L. Yellen directed IRS Commissioner Charles P. Rettig not to use the new funding to increase enforcement of taxpayers earning less than $400,000. The IRS is a bureau of the Treasury Department.
“Specifically, I direct that any additional resources—including any new personnel or auditors that are hired—shall not be used to increase the share of small businesses or households below the $400,000 threshold that are audited relative to historical levels,” Yellen wrote in an Aug. 10 letter to Rettig. “This means that, contrary to the misinformation from opponents of this legislation, small business or households earning $400,000 per year or less will not see an increase in the chances that they are audited.”
But Republican members of Congress and social media users have spread the false claim that the new law will be used to hire “87,000 new IRS agents.”
Sen. Ted Cruz, in an interview on Fox News that was posted to Facebook, got it doubly wrong when he claimed that “87,000 new IRS agents” will be going after small businesses and regular Americans.
“And, by the way, these IRS agents aren’t there to go after billionaires,” Cruz said. “They’re there to go after you. They’re there to go after your small business.”
But, as we will explain later, not all of the new hires will be “agents.” There’s a big difference between IRS agents, such as revenue agents and special agents, and the workers who make up the bulk of the IRS staff. And, as we said, the Treasury Department has directed the IRS not to focus on small businesses and those earning less than $400,000.
Some versions of the claim suggest that the 87,000 new “agents” will be armed – but, as we’ve written before, only “special agents” who investigate criminal violations of the tax code are authorized to carry firearms.
Rep. Matt Gaetz took it one step further, calling it “bizarre” that the IRS bought $700,000 worth of ammunition between March and June 1 of this year. He suggested that the purchases are part of a “broader effort” to get ammunition off the market. But, as we will detail later, the purchases this year are in line with past years, according to government data.
Some of the claims about the IRS on social media were tied to an unrelated event — the FBI search of former President Donald Trump’s Mar-a-Lago home in Florida.
“The IRS is coming for you. The DOJ is coming for you. The FBI is coming for you. No one is safe from political punishment in Joe Biden’s America,” the official Twitter account for the House Judiciary Committee Republicans tweeted.
But Rettig, the IRS commissioner, wrote in a letter to lawmakers on Aug. 4 that the resources obtained with the funding from the Inflation Reduction Act “are absolutely not about increasing audit scrutiny on small businesses or middle-income Americans.”
“Other resources will be invested in employees and IT systems that will allow us to better serve all taxpayers, including small businesses and middle-income taxpayers,” Rettig said.
Funds for customer service and enforcement
A Treasury Department report from May 2021 estimated that a similar $80 billion investment proposed in Biden’s American Families Plan would have allowed the IRS to modernize and restore the “IRS enforcement capability” in several ways — including by hiring 86,852 full-time employees. That’s where the claim about hiring “87,000 new agents” apparently comes from.
The 2021 report said the $80 billion investment to restore the IRS would be broken down into two components: “a dedicated stream of mandatory funds ($72.5 billion over a decade) and a program integrity allocation ($6.7 billion over a decade).”
The $6.7 billion program integrity allocation will be used for “the hiring and retention of at least 5,000 new enforcement personnel,” the 2021 report said. “The mandatory funds are allocated over a 10-year horizon. They provide enforcement resources, including a significant investment in revitalizing the IRS’s examination of large corporations, partnerships, and global high-wealth and high-income individuals.”
Over the past decade, the IRS has lost 40% of its “complex revenue agents” — agents who handle complicated tax returns of large businesses and corporations and go after high-end tax evaders — as its budget has been gutted, according to a Treasury Department spokesperson. “Today, the IRS has the same number of IRS revenue agents for complex work as it had in WWII,” the spokesperson told us in an email.
Over the next five years, the IRS is expecting to lose up to 52,000 employees to attrition, the Treasury Department spokesperson told us in a phone interview. Most of the new hires will replace the outgoing employees and will be on the service side of the IRS.
“The majority of hires made with these resources fill positions of the 50,000 IRS employees who are on the verge of retirement. Of the net new hires, the majority are hired to improve customer services – from upgrading IT to answering phone calls,” the Treasury Department spokesperson said.
The IRS might net about 30,000 new hires, as a result of the number of retirements and new funding. But the IRS hasn’t yet released estimates for how many new employees the agency could hire with funding from the Inflation Reduction Act. The IRS is expected to release the final numbers and breakdown in the coming months.
“The resources to modernize the IRS will be used to improve taxpayer services – from answering the phones to improving IT systems – and to crack down on high-income and corporate tax evaders who cost the American people hundreds of billions of dollars each year,” the spokesperson said. “The majority of new employees will replace the standard level of staff departures over the next few years and will be hired to improve taxpayer services. The agency will also bring on experienced auditors who can take on corporate and high-end tax evaders, without increasing audit rates relative to historical norms for people earning under $400,000 each year.”
A White House spokesperson told us in an email, “both Treasury Secretary Yellen and the IRS Commissioner have been explicit that these funds will be used for the wealthiest taxpayers and not those making less than $400,000 per year. These resources will improve technology and customer service, which will make it less likely that honest taxpayers get audited.”
Spending on ammunition and armed agents
Gaetz, a Republican from Florida, raised concerns in June that the IRS spent $700,000 on ammunition from March to June of this year, and he introduced the Disarm the IRS Act in July.
Gaetz described the ammunition acquisition as “bizarre” in a recent interview. Others have also echoed the claim.
But that’s not an unusual amount of money for the IRS to spend on ammunition and is on par with what has been spent in previous years for the IRS Criminal Investigation division, which was established in 1919.
IRS Criminal Investigation is the sixth-largest federal law enforcement agency in the U.S. But it’s a small unit of the IRS overall, less than 3% of its total workforce, according to the Treasury Department spokesperson.
The IRS Criminal Investigation division doesn’t perform routine IRS audits on average Americans.
“The bulk of IRS’s tax administration work is done by civilian auditors and revenue collectors,” Justin Cole, a spokesman for the IRS Criminal Investigation division, told us in an email. “IRS Criminal Investigation oversees the entirety of the work related to criminal violations of the tax law and other financial crimes.”
The division investigates cases related to money laundering, cybercrime, bank secrecy, national security, national defense and narcotics organizations — a large reason for the need for firearms and training. The division is famously known for the arrest of American gangster Al Capone. More recently, the division has been involved in the task force that is tracking the assets of Russian oligarchs.
“In order to carry out their daily duties, which include search warrants and arrests, CI special agents carry firearms,” Cole said.
Using usaspending.gov, the official source of U.S. spending data and the site used by Gaetz, we found that the IRS has spent $816,248.90 so far in the fiscal year 2022 for “duty ammunition” from Vista Outdoor Sales. That’s a little less than last fiscal year ($842,989.60) and slightly more than in fiscal 2020 ($761,265.40). (All amounts are “total obligations,” as of Aug. 18.)
The majority of the recent $725,460.10 spending went for handgun ammunition and equals about 2,545 boxes of ammunition — “just enough for Special Agent handgun qualifications,” Cole said. “CI purchases the minimum amount of ammunition necessary to cover training and firearms qualifications for its law enforcement employees.”
The IRS spent an average of $712,500 on ammunition for fiscal years 2010 to 2017, according to a 2018 report to Congress by the Government Accountability Office on firearms and ammunition purchases by federal law enforcement agencies.
“There are about 3,000 employees in [the IRS Criminal Investigation division], 2,100 of which are special agents and the remaining professional staff. Only special agents carry firearms,” Cole said.
In 2021, there were 2,046 special agents, who “are among the most highly trained financial investigators in the world,” according to the 2021 annual report.
The number of special agents in the division hasn’t changed much in five years, according to the division’s annual reports. In 2017, there were 2,159 special agents. But the number of special agents has declined substantially since 2009, when the bureau had 2,725 — as we noted 12 years ago while addressing a misleading claim about the IRS hiring “16,500 new agents.” That’s a 33% decrease from 2009 to 2021.
New special agents complete six months of training, including firearms training.
The IRS is not the only government agency that purchases guns and ammunition for enforcement officers. The 2018 GAO report lists several other agencies that make those purchases, such as the Food and Drug Administration, the National Institutes of Health and the Veterans Health Administration.