The IRS is requesting $12.3 billion in discretionary funds, the same amount as the current fiscal year. However, they are also requesting an additional $24 billion in mandatory funds to rebuild their workforce and implement a direct file system, among other enforcement priorities.

The IRS is increasing its focus on auditing wealthy taxpayers, large corporations, and complex partnerships. The agency plans to nearly triple audit rates on large corporations with assets over $250 million and increase audit rates by nearly tenfold on large complex partnerships with assets over $10 million.

The IRS launched a direct file pilot program in 12 states, allowing taxpayers with simple returns to file for free directly with the IRS. The program exceeded its target goal, but only 140,000 taxpayers participated. The IRS is now evaluating the program to determine if it should be expanded nationwide.

The IRS estimates the tax gap, the difference between taxes owed and taxes paid, to be $687 billion per year. The IRS believes that the increased funding from the Inflation Reduction Act will make a significant dent in this gap, but it will require more resources to close completely.

The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that assists taxpayers who are experiencing financial difficulty or have problems with the IRS. The subcommittee expressed concern that TAS is struggling to keep up with demand and that the IRS's budget request for TAS is not sufficient to meet the need.

The IRS has made progress in modernizing its technology infrastructure, including its digital services. The agency is working to close the gap between its digital capabilities and those of private sector companies. The subcommittee emphasized the need for continued investments in technology.

The subcommittee expressed concerns about the Treasury Department's final rule on the clean vehicle tax credit, which relaxes restrictions on sourcing graphite from China. The subcommittee questioned whether American taxpayer dollars should be given to foreign entities of concern.

The subcommittee discussed the IRS's workforce and its policy on telework. The subcommittee expressed concerns about the IRS's decision to require employees to return to the office 50% of the time and asked for more information on the impact of this decision on productivity and office space usage.

The subcommittee discussed the IRS's oversight of nonprofit organizations and the need to ensure that they are using their tax-exempt status appropriately. The subcommittee expressed concern about cases where nonprofit organizations are paying their executives exorbitant salaries.

The subcommittee raised concerns about the IRS's culture, particularly regarding allegations of weaponization and targeting of conservative groups. The subcommittee requested that the IRS provide more information on its efforts to address these concerns and promote a more impartial and transparent culture.

The subcommittee emphasized the need for sustained funding for the IRS to ensure that the agency can meet its mission and provide adequate customer service. The subcommittee expressed concern about the potential for a funding cliff after 2026 and stressed the importance of addressing this issue.

The IRS has stated that it will not increase audit rates for taxpayers earning less than $400,000. However, the subcommittee raised concerns about the data showing that a high percentage of audits are being conducted on taxpayers in this income range. The IRS explained that this data is based on audits that were started before the Inflation Reduction Act and that the data will shift in the future as the agency ramps up audits on wealthier taxpayers.

The subcommittee discussed the challenges faced by legal cannabis businesses in accessing the banking system and paying their taxes. The subcommittee requested that the IRS provide more information on its plans to address these issues, particularly in light of the Administration's plan to reclassify cannabis from a Schedule I to a Schedule III substance.

The subcommittee expressed concern about the high rate of improper payments for the EITC. The IRS explained that a large portion of the error rate is due to technical errors, but the agency is prioritizing its efforts to address cases of fraud and abuse.

The subcommittee discussed the IRS's policies on data sharing. The IRS confirmed that it does not sell data, but it does share data with other agencies under specific statutory provisions.