The IRS Money Hole Gets Deeper

The agency is already pleading poverty despite its 2022 windfall

WSJ editorial. 

"The Internal Revenue Service can’t write its own checks, which means it has to ask Congress for funding like any other agency. But if lawmakers have been tracking its misspending, they’ll turn down the tax collectors’ new $104 billion budget request and demand an audit instead. 

Commissioner Danny Werfel appeared before the House Appropriations Committee recently and told legislators that the IRS faces financial collapse. “Resources are limited,” he said, and the agency “will likely use them entirely before the funding expires.” In other words, the IRS doesn’t think the $60 billion bonus it received from Congress in 2022 is enough, though it is supposed to last through 2031.

The IRS has a brilliant solution for this cash burn: Add more to the pile. Instead of explaining where the money went, Mr. Werfel asked the House to look away and grant his team another massive funding boost, this time through 2034. The extended bonus he seeks would bring total supplementary funding to $104 billion over 10 years.

Mr. Werfel also hinted at mass layoffs if Congress doesn’t pay up. The bad news for taxpayers is that jobs would be cut from the customer service team rather than the growing audit squad. “The vast majority of taxpayers would be unable to reach an IRS representative for assistance,” Mr. Werfel warned. He’s betting that voters will blame their representatives who don’t give him the money he wants and then the agency keeps taxpayers on hold for an hour. This is called political blackmail.

Missing from the IRS’s request was an accounting of how its last round of funding has been run down so quickly. The money it received in the 2022 Inflation Reduction Act (IRA) was meant to fund a strategic overhaul, but not much of the plan has been carried out.

The biggest dud so far has been the hiring spree the agency promised. The strategic plan called for about 20,000 new hires by the end of 2024, and another 10,000 by next year. The IRS fell short of its first-year target and has struggled in particular to recruit auditors, one of its highest-paid types of staffer.

The agency has had an even worse start reforming its taxpayer service arm. Early reports suggest that progress has been flat since the last round of funding. By December the IRS said it had almost 700,000 returns still waiting to be processed, most of which were filed earlier last year.

Another money pit is Direct File, the new government-run platform for submitting returns. Democratic lawmakers have sought in-house tax filing for years to push private preparers out of business, and they funded an IRS study of the program. Yet the IRS went ahead and launched a pilot this year, spending about $114 million for a platform currently serving only 140,000 filers.

All of this is proof of mismanagement at the agency, which howled in protest when House Republicans clawed back $20 billion from the original $80 billion Democrats gave the agency in the 2022 IRA. Despite his pleas, Mr. Werfel is making a strong case for stripping the remainder instead of adding another cent of additional cash."