IRS Announces Tax Refund Increase as It Rakes in Near-Record $4.7 Trillion From Taxpayers

Tax refunds boosted by 3 percent.

The Internal Revenue Service (IRS) building in Washington, on June 28, 2023. Madalina Vasiliu/The Epoch Times

The Internal Revenue Service (IRS) has disclosed that it raked in nearly $5 trillion in taxes from Americans in the last fiscal year, while boosting the amount it paid out in refunds by nearly 3 percent and boasting that it kept its pledge not to increase audit rates for those earning less than $400,000 per year.

After a record $4.9 trillion haul in the 2022 fiscal year, the IRS collected a slightly lower but still substantial $4.7 trillion last year, according to the IRS’s annual Data Book for fiscal year 2023.

The eye-catching tax-intake amount was made possible in part due to a significant funding boost of $78 billion that the IRS used in part to hire more enforcers and deploy advanced technologies like artificial intelligence to squeeze more dollars from non-compliant taxpayers.

“Initial investments of Inflation Reduction Act funding in compliance operations, including hiring additional staff to more adequately address areas of noncompliance, began in fiscal year 2023,” IRS Commissioner Danny Werfel wrote in the report. “We continued to make progress developing and using innovative approaches to better understand, detect and resolve potential noncompliance, such as leveraging new technology and data analytics to fairly enforce tax laws.”

The IRS got roughly $79.4 billion in supplemental funding when President Joe Biden signed the Inflation Reduction Act of 2022 into law, though Congress later clawed back around $1.4 billion.

At the time, many Republicans opposed the funding boost, warning that a large portion of the money would be used to hire an “army of 87,000” tax enforcers who would come down hard on ordinary Americans and squeeze them for “every last penny.”

As claims of the “army of 87,000” enforcers captured the spotlight, the IRS went to great pains to push back on this notion, including by pledging repeatedly that audit rates wouldn’t rise for Americans making less than $400,000 per year.

Critics panned the promise as empty, while the Treasury Inspector General for Tax Administration (TIGTA), the watchdog overseeing the IRS, warned that this pledge could be hard to keep because the IRS uses outdated income thresholds and has no way to identify the complete population of taxpayers that meet the $400,000 criterion.

The IRS insists its $400,000 pledge was a promise it managed to keep.

“In fiscal year 2023, there was no increase in audits of tax returns for taxpayers making under $400,000 per year,” the IRS said in a statement.

Enforcement, Refunds

The IRS expanded its workforce by around 5 percent last year, according to the report. The agency added roughly 5,800 new employees, many of them to work on compliance and bring in more tax dollars.

Forty percent of the the IRS’s 82,990 full-time staff in 2023 were dedicated to enforcement activity, which includes the examination of tax returns, collection of balances due, and administrative and judicial settlement of taxpayer appeals of examination findings.

The agency ramped up spending on enforcement last year, from around $5.41 million in 2022 to $5.62 million in 2023, with most of the increased spending in the area of examinations and collections.

“The IRS has increased its enforcement and collections efforts on high wealth non-filers and those who underreport their tax liability through complex schemes,” the IRS said in a statement.

Thanks in part to the added hiring and funding boost, the IRS its staff processed 271.4 million tax returns and other forms last year, including more than 163.1 million individual income tax returns.

The agency said it paid out $659 million in refunds, a 2.7 percent increase over the 2022 fiscal year.

“The effects of this IRA funding—to hire more IRS employees and modernize the agency’s technology and systems to provide better service to the American people—started showing up in the 2023 tax season,“ Mr. Werfel said in a statement. ”And that progress has accelerated into 2024.”

More Tax Enforcers Hiring

A recent report from the TIGTA shows that the IRS is hiring thousands more tax enforcers in 2024 as the agency looks to boost its tax revenues going forward.

The watchdog report reveals that the IRS is on track to hire a total of 5,582 tax enforcers across three staffing categories: revenue officers, revenue agents, and special agents.

The bulk of the new hiring will be revenue agents, who are employees in the “examination” function that carry out face-to-face tax audits of more complex returns. The IRS plans to hire 4,663 revenue agents in the 2024 fiscal year, which will bring their number up to 12,358.

Some of the hiring will involve onboarding another 517 staff members in the IRS’s “collection” function, whereby employees collect delinquent taxes and secure delinquent returns. This will bring the total by the end of the 2024 fiscal year to 3,470.

The smallest number of new hires is armed special agents in the criminal division. The IRS plans to hire 402 of them this year, bringing the total by the end of the current fiscal year to 2,500.

Given the spotlight on claims of an “army of 87,000” tax enforcers, the watchdog also weighed in on this in its report.

“There has been widespread reporting that the IRS will be hiring 87,000-armed enforcement agents,” the watchdog wrote, adding that “this claim is unfounded.”

“The only enforcement personnel employed by the IRS who are armed are Criminal Investigation Division special agents,” the TIGTA added, noting also that special agents have the lowest number of staff of all the IRS’s enforcement personnel.