"The IRS is under siege. It is suffering from huge underinvestment,” Yellen explained to a Senate Finance Committee hearing on the Treasury’s budget request for fiscal 2023.
Yellen announced that the agency was dealing with massive issues, including a “huge backlog” in working through tax returns, and lacked the personnel required to carry out complicated audits of higher-earning taxpayers.
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As of May 27, the IRS had 10.2 million unprocessed individual returns, including 8.2 million paper returns waiting to be examined and processed, according to IRS.gov.
Senator Robert Casey, a Democrat, announced the IRS had all though stopped auditing tax returns of wealthy private business owners, who were eligible for a 20% tax write-off on their personal taxes, while lower-earning recipients of the Earned Income Tax Credit (EITC) were five times more likely to be audited.
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Yellen announced that those statistics were appalling, and underscored her concern regarding the estimated tax gap, which she stated was mostly because of wealthier taxpayers with opaque sources of income.
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“The resources of the IRS have been cut to the point where they’ve largely cut back on the complicated audits, the ones that are harder, of high-income taxpayers,” Yellen explained to the committee. “The fact that such a large share goes to audit the EITC is very unfair.”
Approving the Treasury’s budget request for $80 billion over 10 years, Yellen stated, would enable the IRS “to be able to ... make sure that people are paying the taxes that are due.
“It's very unfair to workers in lower-income households the way things work now,” she stated.
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Meanwhile, Yellen conceded on Tuesday that inflation is at “unacceptable levels,” but she further sought to underscore that this is not a problem only for the United States.
Speaking during a Senate Finance Committee hearing, Yellen pointed to the Biden administration’s record-setting release of oil from the Strategic Petroleum Reserve.
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“We are part of global oil markets that are subject to geopolitical influences. Given the global nature of these markets, it’s virtually impossible for us to insulate ourselves from shocks like the ones that are occurring in Russia that move global oil prices,” Yellen announced. She continued that it is critical that the United States become “more dependent on the wind and the sun that are not subject to geopolitical influences.”
Throughout her prepared comments, Yellen acknowledged that the United States faces “macroeconomic challenges, including unacceptable levels of inflation.”
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