SC Nebraska News

Washington, D.C. – Congressman Adrian Smith (R-NE) issued a statement following the release of a new report by the Treasury Inspector General for Tax Administration (TIGTA). The report finds that the Internal Revenue Service (IRS) has not fully implemented a 2022 directive from Treasury Secretary Janet Yellen, which prohibits using $80 billion in stimulus funding to increase audits on taxpayers with incomes below $400,000.

“This week’s TIGTA report validates what has been clear all along. Secretary Yellen’s instruction not to increase IRS audits of taxpayers earning less than $400,000 was not a serious policy directive. It was hollow political messaging intended to provide cover for congressional Democrats who had just voted to increase audits on law-abiding middle-class families and small businesses in their districts,” Smith stated. “Not only has IRS made little demonstrable progress on this directive, TIGTA’s report reveals many of the problems IRS faces with utilizing its supersized funding while meeting this standard. To make its own numbers work, it is likely IRS will need to shift resources away from audits focused on instances of higher fraud and improper payment rates and instead target law-abiding small business owners and middle-class families.”

Smith further emphasized the challenges acknowledged by the IRS in implementing this policy. He advocated for his bill to repeal the remaining $80 billion in mandatory funding for the IRS and suggested working through the appropriations process to ensure proper funding allocation.

Smith, alongside Rep. Michelle Steel (R-CA), introduced the Small Family and Small Business Taxpayer Protection Act (H.R. 23) aimed at repealing the $80 billion in IRS funding signed into law by the Biden-Harris Administration in 2022 (Public Law 117-169). H.R. 23 was passed by the U.S. House of Representatives in January 2023. According to a 2021 Treasury Department report, this funding was intended to expand the IRS workforce by 87,000 employees, primarily focusing on increasing audit capacity.

Key findings from TIGTA’s report include:

- The IRS has not finalized a methodology for calculating audit coverage based on 2018 data.

- The IRS is not considering potential marriage penalties between individual filers and married couples earning $400,000 or more annually.

- The definition of “small business” remains undefined for compliance measurement purposes.

- No timeline has been established for developing necessary definitions and calculations.

- Inconsistent documentation exists regarding efforts to implement the 2022 Treasury directive.

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