IRS Commissioner Calls for Multiyear Funding to Help Recoup Potential $1T Tax Gap


Charles Rettig told senators the agency needs increased resources to address aging tech systems and years of personnel cuts. 

IRS Commissioner Charles Rettig told senators Tuesday that funding and resource increases would enhance ongoing agency modernization efforts and help put a dent in a tax gap that could exceed $1 trillion annually.

Speaking to the Senate Finance Committee, Rettig said IRS’ responsibilities have increased significantly in the past decade despite routine budget cuts by Congressional appropriators and the loss of 17,000 tax enforcement personnel over the same period.

Resource cuts have helped contribute to the growing tax gap—the amount of uncollected yet legally owed taxes to the U.S. government—that may have more than doubled since 2013 when the agency officially estimated the gap at $441 billion.

Due in part to foreign-source income and the growth of cryptocurrencies, Rettig told senators the “actual tax gap could approach and possibly exceed $1 trillion” annually. Rettig added that the IRS is “up against more serious threats” than it was a decade ago, referring to various methods used to avoid paying taxes. 

To remedy the problem, Rettig called on Congress for “consistent, timely, adequate and multiyear funding.”

President Joe Biden’s fiscal 2022 discretionary budget request would increase the IRS budget by about 10%, or $1.3 billion over 2021 levels, and would obligate $900 million to tax enforcement purposes. A budget boost could alleviate some of the other pressures the IRS faced in 2021 as the agency’s workforce moved mostly to virtual operations, he said.

Before COVID-19, only 3% of the IRS workforce was telework eligible but it’s 100% now, Rettig said. Even so, during peak tax season, the IRS received as many as 1,500 phone calls per second nationwide, leading to wait times approaching an hour. The IRS too, he said, requires funding to modernize the IT that underpins its tax-collecting system.

“They work, but unfortunately we had to build through the years systems on systems on systems and ultimately the foundation can’t hold,” Rettig said.