The IRS released its annual financial report for fiscal year 2024, touting strides taken using Inflation Reduction Act (P.L. 117-169) funding, revenue collections, and performance metrics as the agency focuses on near-term objectives with the fate of its available resources and structure in question after the election. (IR 2024-286, 11/8/2024)
Released November 8, the 2024 Agency Financial Report boasts “substantial improvements” to the IRS’ IT internal controls and stresses the importance of secure, long-term agency funding.
“The funding provided by the Inflation Reduction Act … has given us a unique opportunity — a once-in-a-generation chance — to envision and realize a future of tax administration that meets the evolving needs of taxpayers and the nation,” wrote IRS Commissioner Danny Werfel in his introductory message at the beginning of the report.
“I am proud of the transformation work we have done in FY 2024,” Werfel continued, pledging his commitment to “completing the additional work that remains on many fronts,” which include protecting taxpayers from scams, expanding digital options for all filers, and maintaining ground gained on customer support phone line improvements.
From October 1, 2023, through September 30, 2024, the average individual tax refund was $3,143, per the report. During the same period, the IRS processed 267 million federal returns, collected $5.1 trillion in gross taxes, and recouped $98.7 billion in enforcement revenue.
According to an accompanying IRS release, the Government Accountability Office “provided an unmodified opinion on the overall effectiveness of the IRS’s internal controls over financial reporting.” Generally, an unmodified opinion means “the financial statements are presented fairly, in all material respects, in accordance with U.S. generally accepted accounting principles,” the agency explained.
This year’s report was released just days after Republicans retook both the White House and Senate. At the time of writing, majority control of the House has yet to be determined, but signs are pointing towards Republican retention.
The election came with high stakes for the IRS amid calls from conservative lawmakers seeking further clawbacks of what remains from the $80 billion first authorized under a Democratic trifecta in August 2022 before the House flipped during the midterm elections later that that year. Over the course of the divided 118th Congress, the Republican-led House, especially the Ways and Means Committee, aimed to rescind some (if not all) of the funding from the Inflation Reduction Act.
Under Commissioner Werfel, the IRS has been on the defensive in showcasing to Republican skeptics and taxpayers nationwide why the funding is critical to Werfel’s vision of overhauling and modernizing the agency as presented in its Strategic Operating Plan released in April 2023 and updated a year later. While the funding sat on the cutting room floor, the IRS proceeded to launch a suite of new initiatives, such as targeted compliance campaigns, the new Direct File program, and taxpayer-facing online features.
Even with House party margins undecided, the known election results raise several questions entering 2025, like who incoming President Trump will tap for his Treasury secretary pick and what their dynamic with Commissioner Werfel will look like.
Another variable is the conservative policy wishlist known as Project 2025, authored by the Heritage Foundation. Although Trump has on multiple occasions publicly sought to distance himself from the agenda, policy experts have noted parallels with what is known of Trump’s plans.
Urban Institute Senior Fellow Howard Gleckman in a contributed article published by Forbes noted that Project 2025, if realized, would install Trump-friendly faces into the IRS and elsewhere in federal government. The Project 2025 document reads that “[f]or the IRS to change and become more accountable, more transparent, and better managed, there is a need to increase the number of Presidential appointments subject to Senate confirmation, and not subject to Senate confirmation, at the IRS.” Listed examples of positions that should be presidential appointments include:
- Deputy Commissioner for Services and Enforcement
- Deputy Commissioner for Operations Support
- National Taxpayer Advocate
- Commissioner of the Wage and Investment Division
- Commissioner of the Large Business and International Division
- Commissioner of the Small Business Self-Employed Division
- Commissioner of the Tax Exempt and Government Entities Division
In February, Gleckman wrote in a Tax Policy Center blog that Project 2025 would also “freeze its budget at current levels” and “consolidate The Bureau of Economic Analysis, the Census Bureau, and Bureau of Labor Statistics into a single office.” The TPC also recently put forth their suggested performance metrics for measuring the success of IRS modernization.
The IRS’ annual budget request for 2025 is $12.3 billion, which mirrors the fiscal 2023 enacted level. The agency said that in order for it hold steady, “annual discretionary appropriations need to provide sufficient recurring ‘base’ resources.” Further, there needs to be “additional flexibility to realign resources between appropriations,” according to the IRS.
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