In early April, the IRS released its 10-year strategic operating plan, a document that includes 42 key initiatives and 190 projects intended to transform how the agency delivers tax services.
As part of the plan, the IRS aims to modernize its legacy systems, go after wealthy tax cheats, and diversify its workforce. With increased federal funding, the agency expects to increase enforcement, but it has assured the public that it will not focus on middle-income taxpayers as it strengthens and modernizes its auditing capabilities.
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The agency’s transformation provides a crucial opportunity for it to keep equity in mind. Here is what you need to know about the IRS 10-year strategic operating plan and how it can form more equitable tax policies and practices.
What’s in the Plan?
The IRS plan is structured around five key objectives:
- Significantly improve services for taxpayers to help them meet their tax obligations and receive refunds, credits and other incentives for which they’re eligible
- Quickly resolve taxpayer issues
- Expand enforcement of complex tax filings and high-dollar noncompliance issues
- Increase operational efficiency through cutting-edge technology, data and analytics
- Recruit, retain and empower a high-skilled diverse workforce and foster a culture that can deliver better results for taxpayers
Though the IRS has never collected racial or demographic data and has embraced a policy of racial neutrality, part of its strategic plan calls for improving statistical data to better support equity analyses and strengthening enforcement practices to promote fairness and equity. From 2023 to 2024, the agency also plans to pilot “Lifting Up Communities” talent hubs to attract and recruit diverse talent from underserved communities. By 2026, it plans to expand these communities to continue filling its pipeline. The agency also plans to develop student pipeline programs, graduate fellowships, bootcamps, and private sector talent rotations to advance diversity, equity, and inclusion (DEI) within its ranks.
Why the IRS Needs to Center Equity in Its Operations
It is clear the IRS has become more mindful that it must better reflect the diversity of the people it serves. These efforts come at a time when the agency’s longstanding practices are being criticized for unfairly targeting taxpayers of color.
A recent joint study by the Treasury Department and several leading universities found that Black taxpayers are three to five times more likely to be audited, particularly when they claim the Earned Income Tax Credit (EIC). This pattern is a result of limited resources, outdated technology and biased algorithms the IRS uses as part of its audit and enforcement practices.
Though the IRS intends to continue its “race-blind” policies and not collect demographic data, it does so at the risk of perpetuating racial disparities in collection and enforcement. However, there are ways around this that would allow the federal government to surface these disparities while safeguarding taxpayer privacy. The Government Accountability Office (GAO) released a report last year that called for removing legal restrictions that prevent greater inter-agency data sharing, which would allow other agencies to cross-reference IRS data with household demographic data to better understand how our nation’s tax policies affect different groups. Taking this step could help to create a more equitable and inclusive tax system.
The IRS has a mission to enforce tax laws “with integrity and fairness to all.” To accomplish this, the agency must begin to realize that its policy of racial neutrality — despite its best intentions — does not always lead to racially-neutral outcomes. Our tax system hasn’t been equitable from its inception and inequalities continue to persist within this system. While the IRS is building a more diverse workforce, it also must embrace new technologies and practices that will help to reduce bias, whether intentional or unintentional. Though long overdue, its 10-year strategic plan is a step in the right direction and will hopefully lay the groundwork for the IRS to truly live up to its mission and make our tax system fairer and more equitable for every taxpayer.
This is a content marketing post from a Forbes EQ participant. Forbes brand contributors’ opinions are their own.
