Two years later: IRS highlights improvements under the Inflation Reduction Act

The Internal Revenue Service (IRS) announced the progress and improvements made in taxpayer services in the two years since the passage of the Inflation Reduction Act, noting that taxpayers can now conduct all interactions with the IRS digitally and that the service is better equipped to combat tax evasion and tax fraud.

The IRS also mentioned that those who want to use the service in person can do so more quickly.

“Two years after beginning the historic work made possible by the Inflation Reduction Act, the IRS has made significant progress on its decade-long journey to improve taxpayer service, modernize technology, and ensure greater fairness in compliance efforts,” IRS Commissioner Danny Werfel said in a statement. “If the IRS stays this course, we will meet a generational imperative on several fronts. This work will enable all taxpayers to conduct all interactions with the IRS digitally if they choose. The IRS will be better equipped to stop tax fraud and provide immediate and comprehensive assistance to victims of fraud. We will finalize and maintain new solutions to protect taxpayer data from unauthorized access and disclosure. And we will adopt increasingly precise audit selection methods that hold accountable those taxpayers who use complex financial maneuvers to hide their income, while avoiding burdening those taxpayers who follow the rules.”

Ting Shen/Bloomberg

As of the end of July, the IRS had offered call-back options to more than 11 million taxpayers during the current tax season, saving taxpayers 3.3 million hours of waiting on the phone, according to the service.

The IRS has also expanded in-person service for underserved taxpayers in rural areas and improved service at Taxpayer Assistance Centers across the country, the IRS said, resulting in 11,000 additional hours of service during the 2024 tax filing season.

In addition, the IRS estimates that more than 94% of taxpayers no longer need to send mail to the IRS because of the ability to file all correspondence digitally. The service has also replaced outdated scanning devices, and more forms can now be filed electronically and via mobile devices.

The IRS has also stepped up its education efforts, sending over 1.8 million reminder letters to people who received the early child tax credit but did not file a 2021 tax return and who could be eligible for the other 50% of the expanded child tax credit. And earlier this year, it launched a new annual tax professional education initiative to educate tax professionals on the eligibility requirements for the refundable tax credit.

In this two-year report card, the IRS also highlighted the simplification of the notices and letters sent to taxpayers each year and the improved service during the last tax season.

The IRS's main phone service reached over 88% capacity during the 2024 tax filing season, the IRS said, up from last year's level of 87% and more than a five-fold increase in phone service levels during the pandemic.

In addition, the IRS said more than $1 billion has been protected through its efforts to stop fraudsters targeting the Employee Retention Credit. These included enhanced compliance checks, cash-out options for small business owners misled by ERC marketers or promoters, a partnership with the Department of Veterans Affairs to help combat tax fraud specifically targeting U.S. military veterans, and warning letters to taxpayers suspected of defrauding taxpayers. On August 16, the IRS announced the formation of the Coalition Against Scam and Scheme Threats, which represents the IRS, state tax agencies, and other members of the tax industry.

The IRS found that budget cuts before the Anti-Inflation Act took effect left it unable to keep pace with the complexity of the methods taxpayers use to conceal their income and avoid paying taxes. “The IRS is now taking swift and decisive action to close this loophole,” the report said.

In addition, the IRS has increased its efforts to pursue low-income and high-net-worth individuals who have failed to pay their tax debts.

“While there is still much work ahead for the IRS to get where it needs to be, there is no doubt that the agency has accomplished much over the past two years,” Werfel said in a statement. “These efforts to serve taxpayers and improve tax administration will continue to intensify and accelerate in the coming months and into the future.”