The Internal Revenue Service recently released its 2024 Data Book, which provides insight into the agency’s activities during the 2024 fiscal year. One major highlight was record revenue collection, with the IRS collecting $5.1 trillion, an increase of almost 9% compared to the prior fiscal year total of $4.7 trillion, surpassing $5 trillion for the first time. This revenue represents approximately 96% of all government funding, underscoring the agency’s critical role in financing federal operations.
Enhanced Taxpayer Services
The Data Book shows that the IRS significantly improved taxpayer assistance during the past two filing seasons. During fiscal year 2024, it helped taxpayers on 62.2 million occasions, a 3.2% increase from the previous year. The improvements were reflected in telephone and in-person support. The IRS provided live assistance to almost 20 million callers, up 11% from the prior year and assisted more than 2 million taxpayers at Taxpayer Assistance Centers, a substantial 26% increase.
Digital Transformation Success
Under its Digital First initiative, the IRS launched more digital tools in FY 2024 than in the previous 20 years combined, including new resources for tax professionals and C corporations. These online tools reduce the need for phone calls and paper processes, saving taxpayers time and headaches. Taxpayers took advantage of these new services, with 2 billion electronic taxpayer assistance transactions (a 47% increase). Two features proved most popular: requests for transcripts and the “Where’s My Refund?” tool that enables taxpayers to check the status of their tax refunds. The “Where’s My Refund?” tool saw 382.8 million inquiries, with the IRS.gov website registering 1.7 billion page views.
Interestingly, the report found that while most taxpayers were satisfied with the IRS’ help in resolving issues, fewer than half found it easy to stay up to date on tax laws and procedures. This is significant to estate planners and clients, who rely on various IRS rulings and procedures to guide their tax decisions. It remains to be seen what, if any, actions the IRS plans to take to remedy this.
Collection Efforts
The Data Book also showed that the IRS is trying to make good on its promise to increase collection efforts. It collected $77.6 billion (net) from its efforts to collect unpaid taxes, a 13.6% increase from the prior fiscal year. The amount collected through installment agreements increased by over 12%, totaling more than $16 billion. The IRS closed over 505,000 tax return audits (examinations) and recommended $29 billion in additional taxes. The agency’s Criminal Investigation unit initiated 2,667 investigations and closed 2,481, with the majority of those investigated focusing on illegal source financial crimes. The majority of those sentenced received federal prison time. Despite the substantial number of audits, the overall audit rate for most taxpayers remains low. For example, fewer than 0.4% of individual returns were examined, and the rate for corporate returns was only slightly higher at 0.66%. The data shows that the ultra-wealthy demographic remains a prime target for auditing.
Outlook
While the Data Book shows that the IRS’s ongoing efforts to improve taxpayer service and ensure compliance are paying off, the future remains uncertain. The agency’s major layoffs and voluntary departures as part of continuing workforce reductions under the current administration are putting a damper on the progress made. The IRS could cut its workforce in half when all is said and done, with estimates that it’s down some 25,000 employees from the start of 2025. An increased tax force was a large part of its successes in 2024, and some experts predict the agency will likely struggle to meet taxpayer needs next filing season without additional hiring.
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