I.R.S. Says Cash Influx Has Made Agency Bigger and More Digital

One year after the Internal Revenue Service received a huge influx of cash, the agency said it had increased its full-time staff to nearly 90,000, a level not seen in more than a decade.

The additional staffing comes as the I.R.S. — which received an $80 billion infusion last year as part of the Inflation Reduction Act — has prioritized hiring at the agency, which has seen its budget and ranks dwindle over the past decade.

The agency is attempting to recruit new staff to improve taxpayer services and crack down on wealthy, sophisticated tax evaders, according to Daniel Werfel, the I.R.S. commissioner.

Still, the agency faces an uncertain future. Republican lawmakers have accused the I.R.S. of planning to use its newfound funding to harass small businesses and middle class families. They successfully cleaved back $20 billion from the agency’s new pot of money as part of an agreement that was reached earlier this year between Republicans and Democrats over suspending the nation’s debt limit, leaving the I.R.S. with $60 billion to carry out its overhaul plans.

Mr. Werfel, in a briefing with reporters on Tuesday afternoon, said that the I.R.S.’s recent accomplishments, such as digitizing paper tax filings and improving responsiveness to taxpayers, should dispel Republican fears about the agency’s intent.

“There were suggestions that this funding was going to supply an army of armed I.R.S. agents who are out to shake down average taxpayers,” Mr. Werfel said. “This myth should be laid to rest.”

The I.R.S. funding is intended to help the agency recover from debilitating budget cuts over the past several years. President Biden has said the additional money will help the agency go after tax cheats, chipping away at the $7 trillion tax gap of money owed to the federal government but projected to go uncollected over the next decade. Although beefed up enforcement is a big part of that, the I.R.S. has been focused on promoting its upgraded technology and improved service.

The agency has been racing to digitize tax forms and reduce hold times that have frustrated taxpayers who try to call the I.R.S. for help. Average wait times fell to 3 minutes from 28 minutes during the 2023 tax season, and the agency cleared a backlog of millions of unprocessed tax forms from 2022.

To underscore the idea of a friendlier I.R.S., Mr. Werfel noted that the agency announced last month it would dramatically curb unannounced visits by agents to homes and businesses. The move was intended to reduce tension between I.R.S. agents and taxpayers and help eliminate scams by people who impersonate I.R.S. staff.

The nearly 90,000 full-time employees at the I.R.S. is a sharp increase from the 79,070 that were employed in 2022. The I.R.S. has not had more than 90,000 full-time employees on its payroll since 2012, according to the 2022 I.R.S. data book.

Most of the new hires have been in the wage and investment division, which is the customer service arm of the I.R.S. Mr. Werfel said that the agency had been actively hiring staff from accounting and law firms and was bringing in data scientists to use mathematical tools to identify taxpayers whose returns suggest they should face an audit.

While Biden administration officials characterized the first year of the I.R.S. modernization plan as a success, significant uncertainty remains. That includes ongoing funding for the agency. A deal reached in June to avert a default on the nation’s debt included an agreement by the White House and Republicans to rescind $20 billion of the agency’s funding.

Mr. Werfel suggested that the clawback would not curtail the agency’s ambitions in the near term but said that additional cuts to its annual budgets could ultimately result in the I.R.S. tapping resources that were intended to modernize the agency to instead fund its daily operations. Still, he expressed optimism that an upgraded I.R.S. would win over Republican skeptics who have seized on cutting the agency’s funding.

“I believe that if we are funded in our base, that with the $60 billion, we can build momentum to prove to Congress and the American people that investments in the I.R.S. pay off for taxpayers in a way that’s very positive,” Mr. Werfel said.