The Biden administration is eager to show how the IRS is using the money to crack down on wealthy tax cheats and improve taxpayers' services. Republicans, who have criticized the funding as wasteful spending, have made several efforts to chip away at the 10-year investment provided by the legislation.
Last fall, the IRS launched an initiative to collect from wealthy individuals who have not paid the taxes they owe. The agency identified about 1,600 taxpayers with more than $1 million in income and more than $250,000 in tax debt. To date, more than $1 billion has been recovered from those individuals, and the effort is ongoing.
Prior to the Inflation Reduction Act, the IRS did not have the staffing or resources to pursue high-income earners that the agency knew owed taxes, IRS Commissioner Danny Werfel said on a call with reporters.
"The taxes were clearly owed by these people, but we didn't have the people or the resources to follow up with them," Werfel said.
The process of collecting past-due taxes starts with a letter to the taxpayer's home. They are given a certain amount of time to either pay the back taxes or dispute the matter. The rest of the process varies depending on the taxpayer's situation.
Targeting wealthy tax cheats
The IRS has launched a series of initiatives over the past two years to crack down on wealthy tax cheats.
For example, it is ramping up audits of wealthy taxpayers, corporations and large business partnerships by hiring more staff and using artificial intelligence. The agency is also examining the personal use of corporate jets.
Some of the funding from the Inflation Reduction Act is being used to modernize taxpayer services. As a result, the agency was able to answer 1 million more calls this year than it did during the previous tax season. Efforts to digitize the agency's 1 billion pieces of paper are also underway.
Earlier this year, the IRS launched a pilot version of its own tax filing service that allowed Americans to file their returns for free directly with the IRS. More than 140,000 people used the program, known as Direct File, to successfully file their tax returns and the IRS plans to expand the program next year.
Battles over IRS funding
The Inflation Reduction Act, which passed without any Republican votes, approved about $80 billion for the IRS over a 10-year period.
But Republicans have made several efforts to claw back the money. In a deal to address the debt ceiling and avoid a US default last year, Democrats agreed to allow for $20 billion of the Inflation Reduction Act funds to be rescinded.
In January, Democrats conceded an acceleration of the $20 billion cut in an effort to get a full-year federal spending law passed in time to avoid a partial government shutdown.