Quick update on the Inflation Reduction Act

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By the time you read this email, the Inflation Reduction Act (IRA) may already be law.

But it will probably be a while before we start seeing any of its effects. Most of the provisions, which focus on the environment and the cost of healthcare, will play out over the next few years.

One provision in particular — additional funding for the Internal Revenue Service (IRS) — has generated a lot of coverage.

The nonpartisan Congressional Research Service prepared a summary of the IRA’s provisions for the IRS.

But I’ll give you my summary here, in response to some of the reports you’ve probably been hearing:

  1. The IRA increases funding for enforcement, meaning IRS will have more resources to examine and audit tax returns than it currently has. The funding is spread out over the next decade, so it’s not a quick infusion.
  2. The IRA does not explicitly fund hiring new agents, and definitely does not authorize hiring 87,000 (or any other number) of new agents. Much of the funds for enforcement will go toward hiring new staff, some of them agents, but also IT, taxpayer service, and general office staff.
  3. IRS will lose about 50–60,000 staff over the next decade to retirement, so even if it were to hire 87,000 new staff, there won’t be that many additional agents.
  4. Hiring more agents does not change anything about how you should operate your business or prepare and file your tax returns.

I’m signed up for a webinar later this week for tax professionals on the IRA. I’ll have more specific notes and recommendations early next week.

Thanks for reading this helpful message. And helpful is the key word for me. I want to ensure these messages are as helpful for you as possible, so feel free to reply with anything that didn’t make sense or any tax, business, or money question you want answered.

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Jeremy Wells, PhD, EA

💼 Helping independent knowledge workers build sellable businesses 🎙 Host JWellsCFO Show 🎙 Co-host @CPAAdvisoryShow 👨‍👩‍👧 Husband & father