House GOP proposes IRS funding cuts, defunding free tax filing system

Republican appropriators in the House are proposing to scale back IRS funding and to do away with the free online tax filing system that the Treasury Department recently made permanent and promised to expand to additional states.

The latest financial services and general government (FSGG) bill from the House Appropriations Committee promises to “[prohibit] funds to be used for the IRS to create a government-run tax preparation software that Congress has not authorized.”

It also reduces IRS funding for 2025 by $2.2 billion below the fiscal year 2024 level to $10.1 billion, slashing enforcement funding in particular by $2 billion.

FSGG Subcommittee Chair Rep. Dave Joyce (R-Ohio) said in a Monday statement that the bill “takes steps to prevent agencies like the IRS from unfairly targeting hardworking Americans.”

Democrats immediately blasted the IRS funding cuts.

“If Republicans have the opportunity, they will deprive law-abiding taxpayers of the choice to file their taxes for free with the IRS’s new direct file program by shutting it down before it expands nationwide,” Senate Finance Committee chair Ron Wyden (D-Ore.) said in a statement Tuesday.

House Appropriations Committee ranking member Rep. Rosa Delauro (D-Conn.) said Wednesday that the plan “includes approximately 80 new, problematic, or pointless policy riders.”

The proposed budget cuts for the IRS follow an initial $80 billion funding boost for the agency passed as part of Democrats’ 2022 Inflation Reduction Act (IRA) that Republicans have been chipping away at in the form of annual appropriations reductions.

Republicans and Democrats agreed to cut around $20 billion of the $80 billion cash injection in the form of annual appropriations cuts last year as part of the deal to avert a default on U.S. debt.

For fiscal year 2023, Republicans secured a $275 million, or 2 percent, cut in funding for the IRS.

The debt ceiling deal reached last June slashed $1.4 billion in IRA funding immediately with an unwritten agreement to take back $10 billion in each of fiscal 2024 and 2025. That agreement was later updated to claw back the entire $20 billion in the current fiscal year.

As of the end of last year, the IRS had only spent about 5.6 percent of its total IRA funding. Only 1 percent of the enforcement budget – its single biggest component and one dependent on specialized hiring of experienced auditors – had been allotted as of December 31.

Republicans voted to get rid of the IRS free online filing program as soon as they retook the House last year, a move that was blocked by Democratic control of the Senate.