The letter to IRS Commissioner Charles Rettig comes amid attacks from Republicans that the $80 billion the Inflation Relief Act would give the IRS over the next 10 years would result in more Americans middle class and small businesses were audited. The Biden administration has repeatedly said the IRS would focus on increased tax enforcement activity and large, super-wealthy corporations and not target households making less than $400,000 a year.
“Specifically, I direct that no additional resources, including new staff or hired auditors, be used to increase the proportion of small businesses or households below the $400,000 threshold that are audited relative to historical levels,” Yellen wrote in the letter to Rettig. “This means that, contrary to the misinformation of opponents of this legislation, small businesses or households making $400,000 a year or less will not see an increased chance of being audited.”
Enforcement resources, Yellen said, “will be focused on high-end noncompliance.”
The new IRS funding is expected to raise $124 billion in additional tax revenue over the next 10 years, a key way Democrats plan to offset the cost of their plan to lower prescription drug costs and combat the climate change.
The Democratic-controlled House of Representatives still needs to pass the legislation, which passed the Senate on Sunday after months of painstaking negotiations. Because of their narrow 50-seat majority in the Senate, Democrats used a special, filibuster-proof process to pass the $750 billion health, tax and climate bill without Republican votes.
Rettig, who was tapped by former President Donald Trump to lead the IRS, told lawmakers last week that low- and middle-income taxpayers would not be the focus of increased enforcement action. He said better technology and customer service would also make compliant taxpayers less likely to be audited.
The bill says the new funding is not “intended to increase taxes on any taxpayer or small business with taxable income below $400,000.”
But Republicans continue to fiercely oppose new funding for the IRS and make claims about increased audits of middle-class Americans.
The Republican National Committee and several Republican lawmakers, including House Minority Leader Kevin McCarthy and Sen. Ted Cruz of Texas, say the new funding will create 87,000 new IRS agents. But this figure is misleading. The Treasury estimated in 2021 that an investment of nearly $80 billion in the IRS could allow the agency to hire 86,852 full-time employees over the course of a decade. But this figure applies to all workers, not just law enforcement officers. Rettig also told lawmakers that the IRS would need to hire 52,000 people over the next six years just to maintain current staffing levels to replace those who retire or leave.
