The Internal Revenue Service is hiring 87,000 new agents, but taxpayers will not feel the pain for another two to three years. That’s how long it will
The Internal Revenue Service is hiring 87,000 new agents, but taxpayers will not feel the pain for another two to three years. That’s how long it will take the agency to hire and train agents. Few have discussed the extent of this pain. Still, it’s something to think about when you consider the majority of coming audits will be conducted by new agents, many of whom will have been hastily hired and operating with minimal supervision.
Playing the audit lottery will not be smart in future tax years. Taxpayers should protect themselves now, especially when profiting from statutory gray areas — such as cryptocurrency staking, investing through decentralized autonomous organizations (DAOs) and other decentralized finance (DeFi) products.
When I started my career in the mid-2000s, business audits were standard, and the new agents were always the worst with which to deal. You had to explain everything in detail to them like little children, and they still would write up non-factual summaries or incorrect legal opinions. That required escalating cases for a manager to review or file an appeal. New agents were also often uber-aggressive, fighting over small changes to build a reputation for always having major tax increases in the audits they took on.
Don’t get me wrong. The IRS needs to hire agents. The situation for the last few years has been nothing short of a nightmare. Good luck reaching an agent to resolve a tax issue! In 2021, the IRS received 282 million telephone calls. Customer service representatives only answered 32 million, or 11 percent, of those calls. The IRS certainly needs to hire more staff to answer phones and resolve issues within a reasonable time.
Related: Biden is hiring 87,000 new IRS agents — and they’re coming for you
The trouble at the IRS dates back to 2011, when major budgetary cuts led to a hiring freeze across the board. The total number of workers at the IRS has fallen massively, from 94,711 agents in 2010 to 78,661 full-time equivalent employees in 2021. This means that adding 87,000 revenue agents will more than double the size of the current IRS!
Add to this the roughly 20,000 agents eligible to retire at the IRS right now, and the IRS will need to hire more than 107,000 agents in the next few years. Thus, two out of three IRS employees will be total newbies in three years. In a perfect world, this could lead to a startup-like culture at the IRS, with innovations and a culture of making a difference. Yeah, right. This is the government. They won’t run things efficiently. And these agents who are tracked on their performance will go for the low-hanging fruit with taxpayers they can bully into big changes on examination, meaning a big increase in small business and individual audits.
However, we won’t see much of an increase in audits for a couple of years. It will take a while for the IRS to find enough hires though to fill all those seats. The hiring freeze was lifted in 2019, but because of the pandemic, actual net hiring has not yet occurred. In 2021, the IRS lost 14,500 employees due to retirement or separation but gained only 12,500 external hires.
This failure in hiring wasn’t from a lack of trying. In 2021, I was inundated with Facebook ads and recruiter messages, but they still couldn’t even hire enough agents to fill the seats of those who were retiring. So one certainly has to ask, how will they find over 100,000 new agents? And will their hiring standards drop substantially to get enough warm bodies in chairs?
Then it will take even more time before we see these agents in the field. Once a revenue agent is hired, there is another one to two years of training before they are unleashed on the public.
The most likely agent you will meet, a “Small Business/Self-Employed Revenue Agent in Field Examination,” requires 1,888 hours of training. At 40 hours per week, this amounts to 47.2 weeks, which is almost a year after vacation and personal time. A “Special Agent for Criminal Investigations” requires 3,904 hours of training, or closer to two years, to get up to speed. Even a “Customer Service Representative” needs 1,500 hours of training, or more than nine months — to answer the phone lines!
While the IRS has been dwindling in size and struggling to replace retiring agents, the tax laws and technology-based financial transactions have become increasingly complex. The Tax Cuts and Jobs Act (TCJA) in 2017 was the first major overhaul of the tax system since the Tax Reform Act of 1986. Five years after passing the TCJA, not all the provisions have been implemented yet. Who knows what strange memos might start coming out in these not-yet-interpreted areas? Then there are all the gray areas created by different types of cryptocurrency transactions, staking, DAOs and DeFi, with many unique fact patterns for which the relevant laws have yet to be interpreted by the tax courts….
cointelegraph.com