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Dealing with the IRS got just a little bit less onerous over the past couple of years, National Taxpayer Advocate Erin Collins said in an annual report to Congress. But cuts to the IRS’s budget would threaten the progress it’s made, she added, and urged Congress to maintain or increase IRS funding.
The IRS answered 9 million more phone calls in fiscal year 2024 than it did in FY 2022, and halved wait times on calls, according to Collins, who heads the Taxpayer Advocate Service, an independent body within the IRS. In 2023, the agency employed around 2,000 more customer service representatives than it did the previous year, and has reduced the average time it takes to respond to “individual taxpayer correspondence” from seven months to three and a half months.
These improvements were partly made possible through $78.9 billion in additional funding the IRS received through the Inflation Reduction Act, Collins said. The inclusion of IRS funding in the IRA was politically contentious, and after the bill was passed some Republican lawmakers stated they’d slash the amount the IRS would receive. In 2023, as MSNBC reported, Congress used a budget deal to cut $20 billion in IRS funding, and it took back a further $20 billion in December 2024 when extending the deal to forestall a government shutdown.
Collins also argued that the IRA funds need to be distributed differently. Currently, 58% of the funds go to enforcement, even though less than 2% of the revenue the IRS collected in 2024 came from enforcement, she pointed out. Only 4% of the funds go to IRS taxpayer services, she said, and that money will likely run out in FY 2026. Adjusting what she called an “extreme imbalance in funding priorities,” she argued, and improving services would make “taxpayer experiences…fairer and more efficient.”
ERC claims are still a bugaboo: Collins pinpointed the slow processing of Employee Retention Credit (ERC) claims as one of the top problems taxpayers have with the IRS. The agency has received a flood of dubious or fraudulent ERC claims which it must sort through. As of October 2024, it was “still sitting on a backlog” of 1.2 million unprocessed claims, Collins said, noting that some small businesses need ERC funds to stay afloat.