IRS Funding Changes After IRA Cuts
IRS funding has shifted since Congress approved a major multiyear boost in 2022, with later legislation reducing portions of that money. Oversight agencies now report that the Internal Revenue Service is reassessing projects as funding levels and staffing change, raising questions about service levels, enforcement priorities, and modernization timelines.
In 2022, Congress enacted the Inflation Reduction Act, providing $78.9 billion in mandatory IRS funding available through fiscal year 2031. According to the Congressional Research Service, the funding was divided into four main categories: $45.6 billion for enforcement, $25.3 billion for operations support, $4.8 billion for business systems modernization, and $3.2 billion for taxpayer services.
CRS explains that this funding was designed to supplement regular annual appropriations and allow the agency to plan long-term improvements. The multiyear structure allowed the IRS to obligate funds over several years rather than relying solely on the annual congressional budget process.
The Treasury Department and the IRS later outlined how the funds would be used in a strategic operating plan. The plan outlined goals such as expanding taxpayer services, updating legacy computer systems, improving digital account tools, and increasing compliance efforts targeting high-income individuals and large corporations.
In 2023, Congress passed the Fiscal Responsibility Act, which included provisions rescinding certain IRS funds previously made available under the Inflation Reduction Act. The public law text refers to rescissions of unobligated balances.
The Congressional Budget Office later clarified the budgetary impact, stating that the law rescinded $1.4 billion of the IRS’s mandatory IRA funding. CBO tracks the effect of rescissions as reductions in available budget authority.
The change did not eliminate the entire multiyear allocation but reduced funding set aside for long-term initiatives. Lawmakers described the rescission in the statute under a section titled “Family and Small Business Taxpayer Protection.”
Treasury officials have described several initiatives launched with IRA resources. In a September 2024 press release, the Treasury Department said the IRS expanded enforcement efforts targeting high-income and high-wealth non-filers and individuals with large delinquent tax debts.
The same release highlighted a “Digital First” approach aimed at expanding online account access, allowing taxpayers to view more notices electronically and manage information through secure online tools. The agency framed these efforts as part of broader modernization and taxpayer service upgrades.
CRS also reported that the IRS said telephone service improved during the 2023 filing season, attributing some of that progress to hiring customer service representatives with IRA funds. Those statements reflect agency-reported outcomes rather than independent performance audits.
In July 2025, the Government Accountability Office reported that the IRS had launched more than 150 projects under its taxpayer service improvement strategy, funded by IRA funds. However, GAO said the agency had not fully determined how it would measure whether those projects improved taxpayer experience.
“IRS has not fully developed plans for assessing whether its projects improve taxpayer service,” GAO stated in its report.
The watchdog agency also said that, as of March 2025, the IRS reported that it was reassessing which projects to continue due to changes in funding and staffing levels. GAO recommended that the agency clarify its evaluation plans to measure results better.
IRS funding generally comes from two sources: annual appropriations passed each fiscal year and multiyear mandatory funding enacted through specific legislation such as the Inflation Reduction Act. Annual appropriations cover routine operations, while mandatory funding can support longer-term initiatives.
CRS explains that the IRA funding was designed to provide stability for modernization, enforcement, and taxpayer services over several years. That structure differs from year-to-year appropriations, which can fluctuate depending on congressional negotiations.
Oversight agencies, including the Treasury Inspector General for Tax Administration, have described the IRA allocation as intended to modernize outdated technology systems, reduce paper backlogs, and strengthen enforcement capacity.
Academic researchers have also examined the potential revenue effects of changes to IRS funding. The Budget Lab at Yale has discussed how enforcement resources can affect revenue collection, citing Congressional Budget Office estimates and prior academic research.
The group has modeled potential revenue impacts over multiyear periods, including scenarios involving rescissions of enforcement funding. These estimates are modeling exercises and are not official government budget scores.
Such research adds context to the broader policy discussion but does not replace formal cost estimates issued by the CBO or oversight findings from the GAO and TIGTA.
Changes in IRS funding levels can affect taxpayers in practical ways, though timing often depends on hiring cycles and technology rollouts. CRS and GAO reports suggest that service levels, digital tools, and enforcement priorities may shift as projects are reassessed.
Taxpayers could see differences in phone wait times, online account features, or how the agency allocates enforcement resources. Paper processing and modernization timelines may also adjust depending on funding availability and staffing decisions.
Oversight agencies emphasize that implementation takes time. As Congress continues to shape IRS funding through appropriations and legislation, the agency’s long-term modernization and enforcement strategy may evolve accordingly.
Taxpayers and members of the public can find official government and university reports below. Full documents are available in their original published form.
By William Mc Lee, Editor-in-Chief & Tax Expert—Get Tax Relief Now
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