IRS chief pleads for another funding boost to skeptical lawmakers

Key appropriators on Tuesday questioned whether the Biden administration needs the additional cash infusion for the Internal Revenue Service that it requested, though lawmakers in both parties stressed the importance that the tax agency maintain its recently elevated levels of customer service. 

IRS is far short of its needs to answer the phones and staff walk-in centers around the country from just its annual discretionary funds, Commissioner Danny Werfel told members of the House Appropriations Committee’s panel on Financial Services and General Government, requiring the agency to maintain the boosted funding level made possible by the Inflation Reduction Act. In its recent fiscal 2025 budget request, IRS requested the funding boost be extended through fiscal 2034 for a total price tag of $104 billion. 

It asked for $12.3 billion as part of its normal discretionary allocation, the same level it received for the current fiscal year. Such funding would only provide for 25,000 employees for taxpayer services, Werfel said, whereas IRS actually needs 38,000 to meet taxpayer demand.

It is currently using IRA funds in an attempt to close the gap, but Werfel warned it would have to dramatically scale back efforts—and potentially furlough or lay off employees—if Congress does not provide an additional tranche of funding by fiscal 2026.“We will have to shrink our customer service,” Werfel said, “and you'll see those lines start to emerge again at our welcome centers and on the phones.”

Still, Rep. David Joyce, R-Ohio, who chaired Tuesday’s hearing— and said IRS "deserves credit for a successful tax season"—suggested the agency should be able to do so without reopening the supplemental funding spigot. 

“It's worth exploring why the IRS says it cannot deliver a successful filing season with the discretionary funds this subcommittee provides,” Joyce said, adding the agency would use the money to “rebuild an army of IRS agents.” House Republicans previously voted to rescind most of the $80 billion cash infusion the IRA provided and successfully negotiated to slash $20 billion from the total as part of a budget deal last year. 

Werfel emphasized the most recent success only occurred because of the money it already received. 

“Our ongoing success hinges on sustained investments to make sure that we have the right size workforce with the right training and tools,” the commissioner said.

IRS answered 1 million more calls in the recent tax season than it did in 2023, and 3 million more than it did in 2022. It has opened more walk-in centers and expanded hours at them. He added the agency also needs the funding to address tax evasion and rebuild the capacity subject matter expertise it lost since its funding was reduced in 2010. The agency has estimated its workforce will peak at 102,500 full-time equivalents in fiscal 2029, up from 90,000 currently and an increase over the 79,000 it employed at the end of fiscal 2022. 

Some Republicans questioned whether significant investments in technology have led to more efficiency at the agency and the potential for reduced headcount at IRS going forward. Werfel said his agency has realized significant gains through digitizing processing and using AI to better target tax cheats, but noted the population of taxpayers grew by 7% between 2010 and 2020. Additionally, Congress has put more on IRS’ plate, such as creating a tax system around digital currency. 

“So even though we may be driving efficiencies in these legacy systems that are in place, making them more efficient, when Congress changes the code and adds new requirements, our overall resource base grows,” Werfel said. 

Republicans on the committee also raised several questions regarding IRS telework policy, suggesting the goal of the workforce as a whole reporting to their offices 50% of the time was insufficient and negatively impacting taxpayer services. Werfel countered that IRS is meeting its goal—as evidenced by a successful tax filing season this year—must remain competitive with offerings elsewhere in the job market and is in line with the governmentwide standard set by the Office of Management and Budget.

Rep. Steny Hoyer, D-Md., the top Democrat on the subcommittee, vowed to provide IRS funding as close to its request as possible. 

“We're gonna have a markup and I'm gonna work very hard to get the money that we need as Americans—not you, not the IRS employee—that we need, as Americans, to fund a tax system that is fair,” Hoyer said.