Sen. Warren Pushes for IRS Funding Boost in Spending Plan

Reduced full-time staff, Rettig said, “has significantly diminished” the IRS’ ability to:

• deliver meaningful customer service;
• maintain sufficient audit coverage of entities and individuals contributing the most to the tax gap;
• collect taxes taxpayers acknowledge they owe but have not paid;
• reduce the tax gap through a coordinated effort of both meaningful guidance and enforcement;
• fund the government; and
• modernize our Information Technology (IT) systems and facilities.

As proposed in the President Joe Biden’s American Families Plan, “enhanced tax gap efforts will generate $700 billion in additional tax collections over the first ten years, and around $1.6 trillion over the course of the second decade,” Rettig said.

The gross tax gap, he explained, “is the difference between true tax liability for a given tax year and the amount that is paid on time. It is composed of the nonfiling gap, the underreporting gap, and the underpayment (or remittance) gap.”

Said Rettig: “With additional mandatory funding, we will better address the tax gap on all fronts—nonfiling, underreporting, and underpayment.”

First, Rettig reiterated that to address the underreporting gap, the IRS will hire specialized examiners, significantly increasing audit activity on high-income individual taxpayers, partnerships and large corporations.

“As explained in the American Families Plan, the Administration projects that over 10 years, we will collect an additional $269 billion in direct enforcement revenue and will protect an additional $46 billion by preventing fraudulent refunds,” Rettig said.

The Department of the Treasury’s Office of Tax Analysis estimated that the additional information reporting for financial inflows and outflows could bring in an additional $460 billion over 10 years, Rettig noted.

The Joint Committee on Taxation estimated the cryptocurrency reporting provision could bring in an additional $28 billion over 10 years, he said.