IRS to Start Spending Its $80 Billion Budget by Hiring People to Answer the Phone

The IRS expansion has generated political heat in the weeks since it became clear that Congress would pass it, with Republicans issuing warnings about armies of agents harassing small-business owners and the IRS ordering an internal security review amid threats to employees. The reality will play out over the years ahead as audit rates increase.

In the short term, however, officials are focusing on a pain point for taxpayers, who have struggled to reach a live IRS employee who can answer their questions. Recently only about one in 10 callers has been getting through to the IRS, according to National Taxpayer Advocate Erin Collins, an independent public representative inside the agency.

Natasha Sarin, the Treasury Department official helping implement the IRS changes, said taxpayers should expect a significantly higher level of service in the next filing season as the IRS digs out from its pandemic-era tax return backlog. She said agency officials are still determining how many people they will hire to answer telephones. In fiscal year 2021, the IRS employed about 79,000 people; about 40% of those were in taxpayer service.

Some of the $3.2 billion in service funding included in the new law will start getting used soon, Ms. Sarin said, even before the six-month deadline set by Treasury Secretary Janet Yellen for the IRS to finish a detailed plan for the full $80 billion. That is in part because the administration is trying to show taxpayers quick, tangible benefits for the spending that a Democratic-controlled Congress approved and that is drawing sustained criticism from Republicans.

“We both have to invest in the pieces that are immediate salves at the same time that we’re investing” for the long term,” Ms. Sarin said.

Ideally, the IRS would have secure electronic ways for tax practitioners and the government to communicate, said Jan Lewis, chair of the tax executive committee at the AICPA, an accountants’ association. Until then, having people answer phone calls is important because it saves taxpayers and tax preparers time and avoids slow mail correspondence.

“Adding people on the phone lines, yes. Let’s get it done,” said Ms. Lewis, who practices in Jackson, Miss. “But let’s make sure they’re trained and able to help.”

Having more people on the phone could help the agency manage its backlogs. It has, at times, shifted lower-level and midlevel workers from answering telephones to processing an avalanche of paper returns and correspondence.

Enforcement is the main goal of the Biden administration’s plan for the IRS, and that is reflected in how the money is divided in the 10-year plan, with $45.6 billion going to enforcement, $25.3 billion to back-office operations and just $3.2 billion for taxpayer services.

That’s in part an attempt by Democrats to secure upfront enforcement funding, the part that’s most politically controversial with Republicans, who may have partial control of Congress as soon as January. Sen. Rick Scott (R., Fla.), has been discouraging people from applying for new IRS enforcement jobs because of what Republicans might do to the agency’s funding, though making significant changes could be hard with Mr. Biden still in office.

“We will immediately do everything in our power to defund this insane and unwarranted expansion of government into the lives of the American people,” Mr. Scott said this month.

Enforcement hiring will take much longer than adding people to phone lines. First, Ms. Sarin said, the IRS will expand and update its human-resources office to handle the higher volume of hiring. Then, it will start recruiting people with specialized knowledge who can audit large partnerships or corporations.

Except for the $3.2 billion, taxpayer services will be funded through the regular annual congressional spending process, and the IRS and Democrats will argue to keep the annual base budget—$12.6 billion overall for the IRS this year—intact so the new money is a supplement, not a replacement. The $3.2 billion is much more of a patch for faltering taxpayer service than a permanent improvement or solution.

The fast spending on taxpayer services also will happen because those services can be expanded much faster than enforcement can. Many customer-service representative jobs can be done remotely, so the IRS doesn’t need to add significant new office space. And the jobs don’t often require much experience or extensive training, so there’s a larger pool of candidates the government can find in a tight labor market.

In the long run, if the IRS succeeds at modernizing its technology so people have more access to their tax information online, fewer of these jobs will be needed. Meanwhile, however, many taxpayers still want to be able to reach an IRS employee on the phone and have been unable to do so.

Richard Rubin is the U.S. tax policy reporter for The Wall Street Journal in Washington, focusing on the intersection of taxes, politics and economics.