Earlier this week, Treasury Secretary Janet Yellen strongly urged Congress to agree to additional funding for the IRS, which is presently overwhelmed by a massive backlog of varied tax returns.
Yellen has requested $80B in funding from Congress to increase the IRS’s ability to process tax returns as quickly as possible, while simultaneously pursuing an alleged $600B in unpaid taxes from wealthier individuals.
Declaring that the IRS is currently “under siege,” Yellen proceeded to note that the organization was “suffering from huge underinvestment.”
Yellen made her remarks during a Senate Finance Committee hearing pertaining to the Treasury Department’s budget request for the fiscal year of 2023.
According to Yellen, the IRS is suffering from a “huge backlog” while working through various tax returns, as well as from insufficient personnel necessary for completing more complex audits of high-earning taxpayers.
The IRS has up to 10.2 million unprocessed returns, 8.2 million of which were filed on paper and awaiting processing by the federal agency.
Per Democrat Senator Robert Casey, the IRS has effectively stopped auditing tax returns belonging to more affluent business owners, all of whom are eligible for a 20 percent write-off on their personal taxes.
On the other hand, Casey notes that individuals who were recipients of the Earned Income Tax Credit (EITC) were five times more likely to face an audit.
Yellen finds the apparent discrepancy appalling, noting that the IRS’s practices reveal a likely tax gap, especially when considering ostensibly opaque sources of income that wealthier, taxpaying citizens may incur.
“The resources of the IRS have been cut to the point where they’ve largely cut back on the complicated audits, the ones that are harder, of high-income taxpayers,” Yellen remarked.
The Treasury Secretary added that it is “very unfair” that a massive proportion of the audits are impacting individuals who are dependent on EITC.
“It’s very unfair to workers in lower income households the way things work now,” Yellen remarked gravely.