A cut in IRS funding would increase the U.S. deficit and slow service delivery

WASHINGTON (Reuters) – Cuts to funding for the Internal Revenue Service, long eyed by Republicans in Congress, would increase the federal budget deficit by $140 billion over a decade, slow service delivery and disrupt complex audits of major companies decrease, said Deputy Finance Minister Wally Adeyemo. Tuesday.

Adeyemo told reporters that the IRS faced a $20 billion drop in funding over the next decade unless Congress acted as part of the next government funding measure to address a budget anomaly that was included in the continuing resolution of September.

The IRS would have to slow its modernization efforts and reduce enforcement, while call wait times would increase unless Congress resolved the budget issue, he said. And the challenges would become even greater if Republicans follow through on their promise to target IRS funding.

Cutting IRS funding would mean the end or a major slowdown of enforcement initiatives targeting wealthy individuals, large corporations or complex partnerships, he said, citing two initiatives that have recovered $1.3 billion so far.

Less money for technology, artificial intelligence and machine learning would limit large-scale enforcement efforts, while audits of middle-class taxpayers would likely increase because they were easier to carry out with less technology.

Newly elected U.S. President Donald Trump previously supported efforts to replace 1960s-era IRS equipment, and the current strategic plan largely reflected the plan laid out by his previous IRS commissioner, Adeyemo said. But Trump pledged during this campaign to revoke all unspent Inflation Reduction Act funds, including billions of dollars earmarked for stricter enforcement by the IRS.

He said IRS enforcement funds would run out sometime in fiscal year 2025, and funds to improve services would run out the following year unless funding was restored.

(Reporting by Andrea Shalal; Editing by Mark Porter)