Today’s Figure: $5.7 Billion

TL/DR –

The IRS has spent $5.7 billion, or 10%, of the $57.8 billion it will receive from the Inflation Reduction Act as of March 31, 2024. The original sum of $79.4 billion allocated to the IRS over a 10-year period was cut to $57.8 billion due to deals between the Biden administration and Republican lawmakers. The expenditure has been mostly used for operations support ($2.3 billion), taxpayer services ($1.4 billion), business system upgrades ($1.3 billion), and enforcement ($690.9 million).

IRS Spendings from the Inflation Reduction Act Funds

The IRS spent $5.7 billion, 10% of the $57.8 billion from the Inflation Reduction Act, as of March 31, 2024, according to a TIGTA report. The Inflation Reduction Act, enacted in August 2022, dedicated $79.4 billion to the IRS to enhance customer service, scrutinize complex high-net-worth tax returns, and update IRS systems and technology.

This funding was reduced to $57.8 billion due to agreements between the Biden administration and Republican lawmakers, including a June 2023 agreement suspending the debt limit and capping federal agency expenditure.

Of the $5.7 billion already spent, $2.3 billion was used for operations support, $1.4 billion for taxpayer services, $1.3 billion for business system updates, and around $700 million for enforcement. Additionally, approximately $11.6 million was spent in FY 2023 for the Direct File tax return system.

In the second quarter of FY 2024, the IRS spent around $1.3 billion of Inflation Reduction Act funds, as per TIGTA. Expenditures by funding activity from Jan. 1, 2024, through March 31, 2024 are illustrated below.

As per TIGTA, $2 billion of the $5.7 billion spent supplemented the IRS’s annual allocation due to a shortfall in covering operating costs. Employee compensation ($2.5 billion) and contractor services ($2 billion) made up the largest expenses.

Of the $2.5 billion spent on labor, roughly $680 million was used in Q2 of 2024. Most labor costs ($1.3 billion) were in taxpayer services, including hiring customer service representatives and staffing taxpayer assistance centers.

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