TL/DR –
The IRS has spent $9.9 billion of its Inflation Reduction Act (IRA) funds, leaving $8.6 billion for technology projects and operations support. After recissions, the agency has approximately $9.5 billion left from the original $79.4 billion over the next five years, with majority of the funds set aside for technology and operations. The IRS also has considerable flexibility in how it uses the remaining IRA funds, considering them alongside its operating budget from annual appropriations and other resources.
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IRS Technology Projects Support Still Has Billions in IRA Funding
The US Internal Revenue Service (IRS) has used roughly two-thirds of the funding received through the Inflation Reduction Act (IRA), leaving billions for technology projects and operations support, according to the Treasury Inspector General for Tax Administration (TIGTA).
A recent snapshot report by TIGTA highlighted that the IRS had expended $9.9 billion of the 2022 law-allocated funds on tech and ops by the end of March. This leaves a balance of approximately $8.6 billion for various purposes, such as business systems modernization, to be used before September 30, 2031. TIGTA pointed out that technology forms a major part of operations support.
Congressional recissions previously shrank the IRA’s original $79.4 billion supplement to IRS, reducing it by about $50 billion. Thus, after the IRS’s current expenditure of $16.5 billion (64%), the agency has approximately $9.5 billion more to spend in the next five years.
Most of the remaining funds are intended for tech and ops. Comparatively, smaller amounts are slated for enforcement ($85 million), taxpayer services ($415 million), and energy security ($436 million).
The IRA had, in addition to its primary budget activities, set aside $15 million for a feasibility study of a free electronic tax filing service. These funds resulted in the creation of Direct File. However, after years of lobbying by the tax preparation industry and congressional Republicans, the Trump administration stopped it.
According to TIGTA, 167 contracts related to the Biden-era law were canceled by the IRS, not just the Direct File. Prior to the cancellations, the IRS had already paid $784 million in contract fees, while it also holds an additional $8 million in “unliquidated obligations for costs that have been incurred but not paid.” The report stated that canceling these contracts reduced the obligations by $127 million.
The IRS “has considerable leeway in how it uses available” IRA funds, according to the report. The agency considers these funds in conjunction with an operating budget composed of annual appropriations and miscellaneous resources. In the fiscal year 2026, the IRS received nearly $11.2 billion from the Consolidated Appropriations Act, setting aside $3.2 billion for technology and operations support.
TIGTA wrote, “These funds are to support taxpayer services and enforcement programs, including rent payments, facilities services, printing, postage, physical security, headquarters. In addition, these funds can be used for other IRS-wide administration activities, such as research and statistics of income, telecommunications, information technology development, enhancement, operations, maintenance, and security.”
The IRS informed TIGTA that despite receiving annual appropriations, the IRA funding is needed since these appropriations “did not cover normal operating expenses.” The report did not delve into IRS modernization efforts in detail, but TIGTA had reported earlier in the year that the IRS’s IT staff count has dropped 42% since the beginning of the second Trump administration, suggesting that these efforts remain a concern to lawmakers and former IT employees especially after the substantial staff reductions.
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