Progress Made by IRS in Implementing the Inflation Reduction Act

By Better Today On Oct 5, 2023

TL/DR –

The Internal Revenue Service (IRS) is making notable progress in implementing the numerous tax provisions contained in last year’s Inflation Reduction Act, as per a report from the Treasury Inspector General for Tax Administration. The law contains 36 tax provisions impacting individual and business taxpayers, and the IRS has been updating its systems, creating or revising tax forms, and offering guidance regarding these changes. The report highlighted that as of May 12, 2023, the IRS had developed or updated 71 tax products related to these provisions, but it also noted concerns with instructions for Form 720 and three business rules related to Form 8974.

IRS Works to Implement Tax Provisions of Inflation Reduction Act

The Internal Revenue Service (IRS) is making strides to implement the numerous tax provisions of the Inflation Reduction Act, according to a recent report by the Treasury Inspector General for Tax Administration (TIGTA). The legislation, which provides IRS funding to improve taxpayer services, update computer systems, and heighten compliance and enforcement actions, has 36 tax provisions affecting individual and corporate taxpayers.

President Biden signing the Inflation Reduction Act of 2022.

To ensure smooth implementation, the IRS formed an oversight office and the IRA 2022 Tax Provision Implementation Office. Of the Act’s 36 provisions, 20 affect tax returns this year. By May 2023, the IRS had revised or created 71 tax products related to these provisions. Minor concerns were found in only the instructions for Form 720, “Quarterly Federal Excise Tax Return,” which had incorrect manufacturer tax rates.

Furthermore, the IRS had to create or modify 78 electronic filing business rules due to the tax provisions affecting this year’s tax returns. Only three business rules related to Form 8974, “Qualified Small Business Payroll Tax Credit for Increasing Research Activities,” raised concerns – some tax returns were rejected for reasons that were redacted from the report.

The IRS is also implementing 16 tax provisions of the IRA that take effect from 2024 through 2028. “As of June 2023, the IRS identified 68 tax products affected for future processing years by these provisions, including 25 tax forms, 41 instructions, and two publications,” said the report. “Efforts to implement processing controls for clean vehicle credits and elective payments for renewable energy property and electricity are underway.”

TIGTA will continue monitoring the implementation of these provisions in the coming year. It recommended the IRS update its computer programming on the three business rules related to Form 8974. The IRS agreed and scheduled these updates for the 2024 filing season.

“Additional work is needed to prepare for Processing Year 2024 and beyond,” wrote Sharyn Fisk, project director of the IRS’s Tax Provision Implementation Office. “We have identified 82 tax products affected in future processing years by the provisions, including 42 tax forms, 39 instructions, and one publication. We are working on implementing processing controls for clean vehicle credits and elective payments for renewable energy property and electricity.”