The Internal Revenue Service’s plan to massively expand its staff has become more difficult with the tight U.S. labor market.
The Democrats’ “Inflation Reduction Act” gave the IRS $80 billion over ten years to boost its personnel in order to collect more in unpaid taxes and upgrade its computer systems. The bill also sought to invest in climate change programs and expand Obamacare.
Biden’s Treasury Department proposed last year to increase the size of the agency by 86,852 employees by 2031, to almost double the current IRS workforce that sits nearly at 79,000, although some of the new hires will replace retirees.
The rate of new hires at the IRS also depends on how much Congress provides for its annual budget.
Republicans called the expansion proposal a “power grab” and warned that the tax agency will send armed agents after middle class taxpayers.
“The IRS is making it very clear that you not only need to be ready to audit and investigate your fellow hardworking Americans, your neighbors, and friends, you need to be ready and, to use the IRS’s words, willing to kill them,” said Sen. Rick Scott (R-Fla.), referring to a controversial IRS job posting recruiting combat trained enforcement agents that was since removed.
The Biden administration wanted the tax agency to take a stronger approach on upper income American households and large corporations, while modernizing its operations, but Senate procedures constraints stripped that language from the bill before it was passed and signed it into law.
The new law currently lacks key salary flexibility and hiring rules that IRS officials and the administration had wanted.
Those key items would have allowed the agency to close the gaps in hiring speed and compensation between the government and the private sector in order to make the jobs more desirable.
Expanding IRS Employee Pool
Meanwhile, income limits on household tax audits and staffing challenges reduced by $23 billion what the IRS projected it could bring in from its expanded enforcement operations, according to the Congressional Budget Office (CBO).
The CBO said that the act no longer contained a key item that, in the end, means the IRS will “hire new personnel more slowly and could make hiring experienced candidates more difficult.”
The tax agency will also be less able to hire quickly and may even fail to potentially meet its hiring goals, leading it to collect less money if the issue is not resolved.
The Office of Personnel Management will first have to grant direct hiring authority and reinstall pay cap waivers that got stripped from the bill.
Congress could also add back the changes as part of the appropriations process, but finding bipartisan agreement would be tough due to strong Republican opposition.
The IRS intended to go on a decade long hiring spree for tens of thousands of workers after a long period of staff retirements, in order to meet the goal to revamp and expand the agency.
The agency has said that as many as 50,000 employees may retire over the next few years, which will keep it from reaching its hiring targets.
It currently has 25,000 fewer employees than it did in the early 2000s.
The White House claims that it needs the workers to fill these longstanding vacancies, as the understaffing will make it harder to execute its expanded responsibilities, leaving unpaid taxes to remain uncollected.
Most of the intended hires will include specialized tax accountants, field enforcement agents, and technical professionals.
The first group of of new hires will be 5,000 IRS taxpayer service staff to answer phones at agency assistance centers for the 2023 tax-filing season, Treasury Secretary Janet Yellen said last week.
“While all the improvements won’t be done overnight, taxpayers can expect to feel real differences during the next filing season,” Yellen said in remarks at a IRS facility in Maryland.
Phone assistance positions are relatively easy to fill as the pool of workers is large and the government salaries are competitive with the private sector at that level.
Dearth of Experienced Tax Personnel
However, finding qualified personnel with the required financial skills may be more difficult, hiring specialists told The Wall Street Journal.
The unemployment rate for workers in the finance sector was at 1.3 percent in August, well below the overall unemployment rate of 3.7 percent.
The WSJ reported that the IRS’s HR departments are understaffed, and that government pay scales are subpar compared to more lucrative private accounting firms, as the agency deals with a historically tight labor market.
The IRS’s plan to aggressively increase audits will see it need to compete for individuals with the same skills at private accounting firms and corporations.
Large private sector firms also pay staff far more than what the IRS is willing to pay for those in tax enforcement and information technology positions, making it more difficult for revenue agents and officials to conduct audits and collect unpaid taxes.
The government only has the benefit of career stability, reliable work hours, solid employee benefits, and pensions, which means that the best talent is unlikely to take those roles.
Another issue facing the IRS’s hiring challenges is if the Republicans, who universally opposed the legislation, take back Congress after the mid-terms.
The GOP has expressed interest in revoking enforcement funding for the IRS and also force the agency to focus on maintaining current operations instead of expanding its mission.
Former IRS Commissioner Charles Rossotti told the WSJ that the IRS will probably meet its hiring needs by primarily targeting younger, less experienced workers and older people nearing retirement.
The federal revenue service has neglected hiring for years, forcing it to revive its dormant on-campus recruiting efforts at colleges.
The WSJ said the IRS could take advantage of mandatory retirement ages at some private accounting firms and hire experienced experts at the twilight of their careers, with steady hours in government.
Meanwhile, even the best tax specialists will need intense training in government procedures before they start, which removes the top staffers away from audits to conduct the training.
Even if the new rules and budget are put in place, the tax agency will still need time to rebuild its hiring and training operations.
“CBO expects that hiring highly specialized enforcement employees who handle the most complex examinations and collections cases will be especially challenging,” said Ron Sanders, a former IRS chief human resources officer to Government Executive.
“Also, if newly hired employees are less experienced, they will require additional training to become fully productive.”