The House Ways and Means Committee, now under Republican management, has poised itself to monitor IRS performance and enforcement activities during the 118th Congress, with other areas of focus including tax relief and catching fraud or abusive practices.
On February 28, Ways and Means Chair Jason Smith of Missouri submitted the committee’s list of hearings and oversight priorities it has in store for the next two years. Unsurprisingly, the GOP plans to laser focus on the IRS, which faces high expectations to facilitate a smooth tax filing season, as well as scrutiny from Republicans skeptical of how the agency will implement the $80 billion additional funding from the Inflation Reduction Act (PL 117-169).
Specifically, Ways and Means will be evaluating “electronic filing, and improper payments levels and fraud prevention efforts” this year and next, as well as examining the IRS’ progress in developing a potential direct free tax return e-filing system, according to the plan. Further, the committee will be watching for President Biden’s budget proposals for fiscal years 2024-2025 pertaining to proposed IRS funding and staffing levels “needed to provide taxpayer assistance and enforce the tax law effectively and efficiently and modernize IRS information technology systems.”
In light of the inflation bill’s IRS funding, Ways and Means intends to check if the agency will comply with Treasury Secretary Janet Yellen’s mandate that audit rates of taxpayers making $400,000 or less not exceed historical levels. Republican lawmakers, since the $80 billion proposal was packaged, have maintained that the funding will directly correlate in increased audit agent hirings, and many are unconvinced that low- and middle-class taxpayers will be spared from examination. Daniel Werfel, Biden’s pick to head the IRS as the next commissioner, committed at his confirmation hearing before the Senate Finance Committee to allocating audit resources toward large corporations and wealthy taxpayers deemed likely to dodge taxes.
A recurring theme in the plan revolves around simplifying the Tax Code. The top item under the committee’s tax agenda involves coordinating appropriate tax relief for families, individuals, farmers, and small businesses. Hearings will also be held to consider restricting the IRS with a “service-first focus.” Ways and Means says it will be looking at common errors made on tax returns by taxpayers and their preparers. Special attention will be given to the $600 reporting threshold for Forms 1009-K, a provision in the American Rescue Plan Act of 2021 (PL 117-2) that was delayed for a year following public pressure from stakeholders.
Tax-exempt entities, “particularly charities, foundations, and political groups operating as social welfare organizations” will be more closely watched to see if they are abusing their status, per the plan. Ways and Means also plans to review the IRS’ application process and the agency’s ability to identify fraud, including schemes that exploit certain tax credits. Other areas on the committee’s plate are excise taxes and related trusts, retirement security, protection of sensitive taxpayer information, and the Biden administration’s negotiations with the Organization for economic Co-operation and Development Framework on Base Erosion and Profit Shifting.
A separate letter released Tuesday outlined Smith’s views and estimates of fiscal year 2024 budget issues that fall under Ways and Means’ purview. With respect to tax policy, Smith wrote that there will be efforts to combat rising costs and economic strain on Main Street taxpayers. “The Committee will examine policies that expand economic opportunity for all and grow America’s middle class,” read the letter. “These worker-focused policies will include re-shoring investment and jobs, strengthening our supply chains, growing retirement savings, developing workforce skills and experience, and encouraging small business growth.”
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