IRS uses 61% of its IRA funding
TL/DR –
The Internal Revenue Service (IRS) has spent almost two-thirds of the approx. $26 billion remaining from its portion allotted by the Inflation Reduction Act (IRA), amounting to $15.7 billion as of September 30, 2025. The largest expenses were employee compensation ($7.3 billion) and contractor advisory and assistance services ($5.2 billion), with the money spread across various priorities, including operations support and business systems modernization. Originally, the IRA pledged the IRS $79.4 billion, which was later reduced by Congress to $37.6 billion and further reduced to $26 billion.
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IRS Spends Majority of Inflation Reduction Act Funds
The Internal Revenue Service (IRS) has utilized almost two-thirds of the $26 billion allocated to it under the Inflation Reduction Act (IRA), according to a new study by the Treasury Inspector General for Tax Administration. The study evaluates the IRS’s expenditure of IRA funds, revealing that as of the end of the government’s 2025 fiscal year on September 30, 2025, the agency had spent $15.7 billion.
Origins and Reductions in IRA Funding
Initial commitments to the IRS under the IRA totaled $79.4 billion. However, these funds were progressively reduced by Congress. The sum was initially cut to $37.6 billion last year before being further reduced to $26 billion in January this year.
Major Areas of Expenditure
The largest expenses incurred by the IRS included employee compensation at $7.3 billion and contractor advisory and assistance services, which amounted to $5.2 billion. This comes despite a significant reduction in the agency’s personnel last year, with many employees participating in incentive programs that maintained their pay until September 30th.
Distribution of Expenditures
The IRS’s expenditures were distributed across several priorities. Operations support received the lion’s share of IRA funding of $13.7 billion, with the IRS spending just under half of this allocation. Business systems modernization followed with an allocation of $4.8 billion, 60% of which has been spent. Enforcement and taxpayer services trailed behind, having been allotted $3.8 billion and $3.2 billion respectively. The IRS has effectively spent the entirety of the enforcement allocation and over three-quarters of the funds dedicated to taxpayer services.
The Treasury Inspector General for Tax Administration made no recommendations in the report.
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