The IRS Just Lost Billions. Here’s What That Means For Your Taxes

The IRS has lost $20 billion in funding as part of Congress’ bid to stop the government shutdown, crippling its ability to go after high-earning tax dodgers. The organization was meant to receive an additional $80 billion as part of the Inflation Reduction Act, but this has now been halved after successive acts of Congress. Newsweek contacted the IRS for comment on this story via email. Why It Matters The Biden administration had originally allocated $80 billion to the IRS in the 2022 Inflation Reduction Act, in order to help the agency address wealthy tax cheats. However, the funding was reduced by $20 billion in 2023 by the budget deal, and again last week, when another $20 billion was siphoned off to reach an agreement on the national debt and avoid a government shutdown. This means the IRS is getting just half what it was originally receiving. What To Know According to Biden administration officials, the cuts to funding means that the agency will conduct around 400 fewer audits of major U.S. businesses every year, along with 1,200 fewer audits of “high-income individuals.” They predict that these losses could add $140 billion to the national debt over the next decade, as higher earners will be subject to fewer checks from the IRS. The Internal Revenue Service headquarters building in downtown Washington, Thursday, March 9, 2017. The agency is receiving just half the funding it was promised in the Inflation Reduction Act. The Internal Revenue Service headquarters building in downtown Washington, Thursday, March 9, 2017. The agency is receiving just half the funding it was promised in the Inflation Reduction Act. AP Photo This estimated $140 billion addition to the national debt is revenue that would otherwise be collected by the IRS. For low to medium-income earners, it means that future tax burdens could be higher, as more spending will be needed to offset the national debt. The cuts were made in order to pass a spending bill to avoid a government shutdown on December 20. The successful spending bill keeps the government funded until mid-March, while also providing $100 billion in disaster aid and $10 billion in aid to farmers. What People Are Saying House Speaker Mike Johnson described the funding allocations in the bill as “necessary,” saying: “This was a necessary step to bridge the gap to put us into that moment where we can put our fingerprints on the final decisions on spending for 2025.” What Happens Next The new Trump administration will enter office on January 20, and Trump has pledged to double down on the tax cuts that he passed during his first term. His new policy could see 93 million people paying fewer taxes, due to sweeping income tax breaks. Trump has tapped Billy Long, a former professional auctioneer who represented Missouri’s 7th Congressional District from 2011 to 2023, as the next head of the IRS. Long’s nomination will need to be confirmed by Congress, once the new Senate is sworn into office in January. Do you have a story we should be covering? Do you have any questions about this article? Contact LiveNews@newsweek.com.