Fact Check Team: How the IRS expansion could impact middle-class Americans

House Minority Leader Kevin McCarthy tweeted that there will be 710,000 new audits for Americans who earn less than $75,000.

The National Desk’s Fact Check Team has been looking through the Inflation Reduction Act to see if his statement adds up.

There are some holes in McCarthy's assessment. Republicans used a 2021 Congressional Budget Office analysis that said new funding for the Internal Revenue Service would raise audit rates for taxpayers to levels of about 10 years ago.

Based on the analysis, GOP leaders took 2010 audit rates and 2018 tax returns and concluded there would be thousands of new audits for the middle class. The main issue with the claims is that the CBO's analysis is not of the updated bill and none of those figures are in the bill.

According to the latest numbers from the IRS, in 2019, Americans making between $25,000 and $500,000 had a 0.2% audit rate. The highest was for those making more than $10 million at a rate of 8.7%.

A Government Accountability Office report that shows from 2010 to 2019, audit rates decreased for all income levels. IRS officials said audit rates declined due to staffing decreases and because it takes more staff time and expertise to handle complex higher-income audits.

The Biden administration says there shouldn’t be any negative impact on the middle class.

Just days ago, Treasury Secretary Janet Yellen sent a letter to the IRS directing them to not use any new resources to increase audit rates on Americans making under $400,000 but experts say there could be some indirect impacts on the middle class.

For example, the Inflation Reduction Act requires a minimum 15% tax for large corporations. As a result, experts think businesses could lower wages and use that money to pay the taxes.

There are many critics of the 87,000 agents being added to the IRS. That’s because last year, before the bill was publicly available, the Treasury Department proposed a plan to hire roughly that many IRS employees if it got the money.

According to a Treasury official, we will know how many employees they plan to hire in the next few months but the new agents will not be hired at the same time.

The new hires would happen over the next ten years and they won’t all be auditors. Many will be replacing employees that are expected to quit or retire.

According to the numbers, the IRS could use some extra hands. It currently has roughly 78,000 employees but the agency’s budget has shrunk by more than 15% over the last decade and according to the IRS because of that, staffing levels and audit rates have declined.

As a result of those staffing shortages, IRS agents only answered 10% of phone calls during this year's filing season and they currently are dealing with a backlog of 11 million unprocessed tax returns.

The inflation bill gives $80 billion to the IRS, which includes $25 billion for operations, $5 billion for technology modernization and $45 billion for tax enforcement.

The rest of the money would be spent on upgrading technology and operations at the agency.