IRS to Hire 30,000 Employees Over the Next Two Years

The Internal Revenue Service will bring on about 30,000 employees over the next two years as it begins spending the $80 billion in new funds Congress provided last year, the Biden administration said in an operational plan it unveiled on Thursday. 

The much anticipated Inflation Reduction Act implementation details laid out the administration’s goals to boost enforcement on high-earning individuals and corporations and modernize the agency so it can vastly improve the taxpayer experience. Officials on Thursday said the plan and its accompanying resources would energize the IRS workforce and lead to a significant return for the U.S. government. 

IRS plans to bring on about 10,000 new employees in the current fiscal year, most of whom will focus on taxpayer services. In fiscal 2024, the agency will double that to nearly 20,000 hires, with $1.4 billion and the plurality of new staff going toward enforcement. The Treasury Department released its plan several weeks after its self-imposed deadline, drawing the ire of many on Capitol Hill.

All told, IRS plans to spend about $47 billion on tax enforcement efforts, $7.5 billion on taxpayer services, $12 billion technology improvements, $4 billion on energy security and $8 billion on hiring and retention. 

The Biden administration previously received significant pushback after Republicans highlighted a Treasury document that estimated IRS would use an $80 billion cash infusion to hire 87,000 employees over 10 years. While agency officials stressed those workers would go mostly toward backfilling existing vacancies and replacing a wave of expected retirements, Treasury took a more cautious approach in its new plan. IRS estimated its workforce totals stemming from IRA funds just two years out—with newly sworn in Commissioner Danny Werfel saying a fiscal 2025 estimate was coming soon—which officials said would provide greater flexibility as the agency adapts to new technology it plans to implement. 

The estimate provides “the right windows to start drilling down into more precision,” Werfel said. “As we can start seeing the technology that's coming in, we can start to assess the workload and what that looks like.”

He added as IRS starts to "unpack complex filing" in a way it has not done in many years, the agency will gain a better sense of what its workforce needs are. The three-year outlook represents “good management and leadership practice,” the commissioner said. 

“Beyond that three-year window, we're going to start to see, as we move forward in time, we're going to start getting answers,” Werfel said. “How is this technology scaling? What does the universe of complex tax issues look like, as we get closer to it?” 

Wally Adeyemo, Treasury’s deputy secretary, said IRS will, within the next five years, digitize all paper returns as they come in, which will allow the agency to eliminate its backlogs and shift employees to other types of work. IRS has already scanned 20 times more paper returns in 2023 than it did in all of 2022. He added IRS will hire more data scientists than it ever has, as they can help the agency take advantage of the technological advancements.” 

“As we think about enforcement, it's a far more holistic thing now in terms of the traditional attorneys, accountants, but also data scientists to help us look at some of the most complicated tax returns,” Adeyemo said. 

IRS enforcement personnel has declined by 30% since 2010, while the number of filings increased by 14% in the same period. While the U.S. population grew by 7% over the last 12 years, Werfel lamented, IRS saw a reduction of 15,000 employees. 

“For more than a decade, the IRS has struggled to keep pace with a rapidly changing world, a growing population of filers, an expanding economy and an increasingly complex set of tax laws,” Werfel said. “For the last several years, these sharply reduced staffing levels prevented the IRS from providing the level of service taxpayers deserve in every aspect of our operations.”

The hiring, Werfel explained, would boost not just enforcement but allow the agency to become a “world-class customer service operation.” IRS has already brought on 5,000 new customer service employees using IRA funds, leading to the agency answering between 80%-90% of its calls this tax season compared to just 10% in 2022. Within the next five years, IRS plans to allow taxpayers to securely file all their documents in an online system and receive real time updates on the status of their returns. The agency will fully staff its taxpayer assistance centers located across the country by next year. It will also develop “pre-filing programs” to help taxpayers identify problems with their returns before they submit their filings. 

Meeting Its Goals

The plan lays out five main objectives: helping taxpayers properly fill out their taxes, more quickly addressing taxpayer issues, expanding enforcement for those with complicated filings and high-dollar non-compliance, boosting technology and data, and attracting and retaining a highly skilled, diverse workforce. Each objective contained specific targets and metrics to measure success and steps the agency will take to meet its goals. IRS is standing up a Transformation and Strategy Office to coordinate IRA implementation, including by reporting on progress, identifying and solving challenges, managing agency-wide efforts and selecting “owners” for each of the agency’s new initiatives. 

To reach its hiring objectives, IRS vowed to redesign its hiring and onboarding processes to make them faster and better able to attract more people. That will include publishing rolling job announcements, recruiting in more places and communities, reviewing position descriptions and qualification requirements and digitizing candidate assessments. It will market the “value proposition” of working at IRS and use analytics to target potential candidates, including by opening up “pre-hire skills development bootcamps.” The agency said it will improve its physical office space and develop new work models to allow for more flexible work hours and geographic locations. IRS noted it has more than 100 personnel systems that it will, by 2025, consolidate into one platform “to streamline the management of employee data.” 

IRS will be getting some help as it readies itself for its unprecedented surge in hiring. It has signed two contracts to assist with recruiting and background investigations, while the Office of Personnel Management has provided expedited hiring authority for up to 10,000 Taxpayer Service and Enforcement positions annually through 2027. Still, the agency faces many hurdles as it attempts to meet its ambitious plan. 

Once its employees are onboarded and equipped for the job, Werfel said, taxpayers—and the U.S. Treasury—will see an immediate return on investment. The Congressional Budget Office estimated the IRA’s IRS spending would raise more than $200 billion in revenue, or a net of $124 billion.

“Once that employee is in seat and trained and doing their work, that return is immediate,” Werfel said. “It doesn't take five or six years to get to a break even point.”

Werfel and Adeyemo both stressed the Biden administration’s longstanding IRA talking point that the audit rate for individuals making $400,000 or less will not exceed their historic levels. For the next several years, he said, it will remain far below the level IRS reached when it had significantly more staffing. Initial enforcement hiring will focus only on high-earning individuals and large corporations, meaning audits of average taxpayers will remain at the historically low rates experienced over the last several years. Werfel also pushed back on the suggestion by some IRA opponents that the funds will lead to an expansion of IRS’ law enforcement arm, saying the agency’s Criminal Investigation division will not grow beyond its current 3% of the workforce.  During his swearing-in ceremony, Werfel joked IRS employees would transform the agency “armed only with their calculators.” 

Tony Reardon, president of the National Treasury Employees Union, which represents most IRS workers, praised the agency's plan and said it would work with the agency to help it achieve its goals. 

"The Strategic Operating Plan released by the IRS proposes to use the IRA funding to rebuild and modernize the agency by providing the necessary staffing to deliver services to taxpayers, technology to make compliance with the tax laws easier and expanded enforcement efforts for large corporations and partnerships and for high wealth individuals with complex returns," Reardon said. "As the IRS notes, its employees are its greatest asset, and the plan rightly focuses on the importance of a workforce that has the tools and resources it needs to deliver for American taxpayers." 

The commissioner added that employees are newly galvanized to demonstrate what they are capable of once fully resourced. 

“This is an exciting time to be working at the IRS,” Werfel said. “Our employees are excited by the prospect of having the proper tools and resources to do their jobs helping taxpayers and the nation. IRS employees, including me, cannot wait to show how the actions under this plan will translate into real improvements for taxpayers.”