IRS recovers $4.7 billion in back taxes and braces for cuts with Trump and GOP in power

By FATIMA HUSSEIN The Associated Press

FILE - A sign is displayed outside the Internal Revenue Service building May 4, 2021, in Washington. On Friday, Aug. 19, 2022. (AP Photo/Patrick Semansky, File)[ASSOCIATED PRESS/Patrick Semansky]

WASHINGTON (AP) — IRS leadership on Thursday announced that the agency has recovered $4.7 billion in back taxes and proceeds from a variety of crimes since the nation’s tax collector received a massive glut of funding through Democrats’ flagship tax, climate and health law in 2022.

The announcement comes under the backdrop of a promised reckoning from Republicans who will hold a majority over both chambers of the next Congress and have long called for rescinding the tens of billions of dollars in funding provided to the agency by Democrats.

IRS leadership, meanwhile, is hoping to justify saving the funding the agency already has.

On a call with reporters to preview the announcement, IRS Commissioner Danny Werfel said improvements made to the agency during his term will help the incoming administration and new Republican majority congress achieve its goals of administering an extension of the 2017 Tax Cuts and Jobs Act.

Republicans plan to renew some $4 trillion in expiring GOP tax cuts, a signature domestic achievement of Trump’s first term and an issue that may define his return to the White House.

“We know there are serious discussions about a major tax bill coming out of the next Congress,” Werfel said, “and with the improvements we’ve made since I’ve been here, I’m quite confident the IRS will be well positioned to deliver on whatever new tax law that Congress passes.”

Tax collections announced Thursday include $1.3 billion from high-income taxpayers who did not pay overdue tax debts, $2.9 billion related to IRS Criminal Investigation work into crimes like drug trafficking and terrorist financing, and $475 million in proceeds from criminal and civil cases that came from to whistleblower information.

The IRS also announced Thursday that it has collected $292 million from more than 28,000 high-income non-filers who have not filed taxes since 2017, an increase of $120 million since September.

Despite its gains, the future of the agency’s funding is in limbo.

The IRS originally received an $80 billion infusion of funds under the Inflation Reduction Act though the 2023 debt ceiling and budget-cuts deal between Republicans and the White House resulted in $1.4 billion rescinded from the agency and a separate agreement to take $20 billion from the IRS over the next two years and divert those funds to other nondefense programs.

In November, U.S. Treasury officials called on Congress to unlock $20 billion in IRS enforcement money that is tied up in legislative language that has effectively rendered the money frozen.

The $20 billion in question is separate from another $20 billion rescinded from the agency last year. However, the legislative mechanism keeping the government afloat inadvertently duplicated the one-time cut.

Treasury officials warn of dire consequences if the funding is effectively rescinded through inaction.

Trump last week announced plans to nominate former Missouri congressman Billy Long, who worked as an auctioneer before serving six terms in the House of Representatives, to serve as the next commissioner of the IRS. Democrats like Sen. Ron Wyden (D-Ore.) have called Long’s nomination “a bizarre choice” since Long “jumped into the scam-plagued industry involving the Employee Retention Tax Credit.”

Trump said on his social media site that “Taxpayers and the wonderful employees of the IRS will love having Billy at the helm.”

Werfel’s term is set to end in 2027, and he has not indicated whether he plans to step down from his role before Trump’s inauguration. Trump is permitted to fire Werfel under the law.