Treasury's Yellen calls Republican effort to cut IRS funding for Israel 'damaging and irresponsible'

WASHINGTON (AP) — Treasury Secretary Janet Yellen called Republicans' most recent round of proposed funding cuts to the IRS “damaging and irresponsible" during a Tuesday event meant to commemorate new customer service improvements to the agency.

“Playing politics with IRS funding is unacceptable,” Yellen said, referring to an aid bill that passed the House last week that would cut $14 billion from the nation’s tax collector in exchange for providing assistance to Israel as it pursues a war against militant Hamas in Gaza. The bill is unlikely to be approved by the Democratic-controlled Senate.

While House Republicans say the IRS cuts would save taxpayer money and offset spending, independent budget analysts say the cuts would cost taxpayers billions of dollars from uncollected tax revenues.

President Joe Biden has said he would veto the bill if it reaches his desk.

“The current proposals to cut funding for the IRS make this an especially crucial time to talk about the importance of this work," Yellen said in a speech at IRS headquarters in Washington.

The $80 billion the agency received last summer through Democrats' Inflation Reduction Act has been vulnerable to cuts, but Yellen and the Treasury Department are trying to keep the focus on what the allotted funds are doing for taxpayers.

One new announcement is that taxpayers will be able to submit all sorts of tax documents and other communications to the IRS digitally months earlier than originally planned under a new timetable for paperless taxpayer communications announced Tuesday by Yellen.

“The impact will be significant and far-reaching,” she said, “and we’ll speed up processing times for the system as a whole.”

The IRS had previously been overloaded with paper documents that prevented the agency from processing tax forms at a faster pace.

The processing change is expected to cut back on the $40 million per year that the agency spends storing more than 1 billion historical documents. The federal tax administrator receives more than 200 million paper tax returns, forms and pieces of mail and non-tax forms annually, according to the IRS.

“Taxpayers will save time and effort,” Yellen said, as people can begin submitting their documents now, instead of waiting until the originally planned time frame of early next year.

Under the initiative, most people will be able to submit everything but their tax returns digitally in 2024. As the IRS pilots its new electronic free file tax return system starting in 2024, the agency will be able to process everything, including tax returns, digitally by 2025.

Yellen also talked about improved customer call wait times, updated technology on the IRS website and increased face-to-face customer support.

“This filing season, we will build on this foundation and continue expanding services for taxpayers: by phone, online, and in person,” Yellen said.

Still, the agency is vulnerable to cuts.

Earlier this summer, Republicans successfully rescinded $1.4 billion from the agency in exchange for lifting the nation’s statutory debt ceiling. The debt deal also included an agreement to take $20 billion from the IRS over the next two years and divert those funds to other nondefense programs.

At the Tuesday event, IRS Commissioner Daniel Werfel said that for the IRS to continue in building on its customer service and enforcement priorities “a consistent, reliable funding stream remains critical for the agency — both in our annual appropriations process as well as maintaining IRS funding.”

“The debate over IRS funding comes down to a fundamental choice,” he said, “the choice between an IRS that is ill-equipped to assess and collect what is owed by our wealthiest taxpayers or one that is ready to assess and collect no matter how complex and sophisticated the efforts to shield income.”