The Internal Revenue Service is planning a hiring spree for top-tier talent as it uses $80 billion to upgrade the tax agency’s systems and to scrutinize a greater number of the more complicated returns that are filed by corporations and wealthy taxpayers.
Now it has to convince people to come aboard at the IRS instead of taking potentially more lucrative work in the private sector.
And it has to make that recruiting pitch in the midst of an accountant shortage, and knowing that the prospect of working for the taxman in a politically charged moment may turn off some candidates.
On Friday — the same day the Labor Department showed the economy adding 236,000 jobs in March — observers said the IRS has a tough job ahead on staffing.
A day earlier, IRS and Treasury Department officials released a plan for spending the $80 billion allocated to the IRS over a decade under the Inflation Reduction Act. More than half the sum, $45.6 billion, is earmarked for tougher enforcement against wealthy taxpayers and corporations.
In the coming two years, the plan shows, the IRS wants to use some of the funding to add more than 7,000 people to its enforcement ranks and almost 6,500 additional staffers for taxpayer services. And the tax agency has been hiring quickly recently, including adding 5,000 customer-service agents.
The IRS said it now has 2,600 staffers dedicated to examining complex returns. Auditing a wealthy taxpayer’s return can take up to 250 hours, compared with the five-hour average review for simple returns, the Treasury Department said. And it can take between two and four years to complete an audit of a corporate tax return, the department noted.
“We will focus [Inflation Reduction Act] enforcement resources on hiring the accountants, attorneys, and data scientists needed to pursue high-income and high-wealth individuals, complex partnerships, and large corporations that are not paying the taxes they owe,” Danny Werfel, the IRS’s new commissioner, said in the spending plan’s opening letter.
“In rebuilding and sustaining our capacity and capabilities with discretionary and mandatory funding, we plan to focus on hiring and growing talent with the right skills to address the nation’s increasingly complex tax system,” he added.
The IRS told MarketWatch it is creating strategies to attract potential employees in a variety of ways. “That includes attracting individuals with public-service motivation; the opportunity to work on unique problems and challenges; flexible work arrangements; and a competitive total compensation package, including health and life insurance, retirement programs, and benefit programs such as childcare subsidy,” the IRS said in a statement.
“With the Strategic Operating Plan, the IRS will become competitive with the private sector in the hiring of young accountants, for example, by highlighting the opportunities for those accountants to work on very interesting work right out of school, as opposed to waiting for years as could be the case at an accounting firm,” the agency said.
Most federal employees are paid on the “general schedule” pay system, which has 15 grades as well as steps within the grades, the IRS explained.
At the highest grade, the general schedule’s national range on base pay is $117,518 to $152,771. The IRS has “locality pay” to account for higher living costs in more expensive parts of the country, as well as other pay formats for managers and critical pay for some highly specialized jobs.
There are IRS jobs that pay well: The range on one current listing for senior revenue agents in Alabama is $116,393 to $183,500.
Meanwhile, in the private sector, the starting salary for a senior corporate accountant with enough experience to work independently is $96,500, according to the talent and recruiting company Robert Half International
RHI,
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Pay starts at $112,000 for a star performer, according to Robert Half data.
In a major city like New York, a high-performing senior accountant could fetch a starting salary of almost $155,000, and roles like corporate tax managers and tax directors could pay even more, Robert Half’s pay calculator shows.
Tax work is specialized, and accountants have been in short supply. The number of accounting graduates dropped by approximately 3% for bachelor’s programs in the 2019-2020 school year and by more than 8% for master’s programs, according to a report from the American Institute of CPAs.
The professional and business services sector added 39,000 jobs in March, the Bureau of Labor Statistics said Friday. That’s around the sector’s growth rate for the past six months, the agency noted.
“For accounting and finance professionals, a significant talent shortage is expected to continue across all markets,” said Sean Puddle, executive director of the recruiting firm Michael Page. “Savvy candidates are very aware of these market conditions and are expecting strong, competitive offers from potential employers.”
As a result, the people at the IRS who are making hiring decisions need to know what skills they are looking for and what sorts of salaries will bring in the most desirable candidates, Puddle said. They also need to explain the intangibles, like agency culture, that might draw people to work at the IRS, he added.
Bringing on tax professionals with years of private-sector experience who are looking for a change “sounds easy — but it’s not, really,” said Mark Everson, who served as IRS commissioner from 2003 to 2007, during the George W. Bush administration.
And salaries might not be the biggest barrier the IRS has to contend with, said Everson, who’s now vice chair of Alliantgroup, a specialty tax-services provider.
“Not everybody wants to work for the government,” he said. “It’s perceived as bureaucratic — and particularly the IRS. Tax administration has become part of this rough political discourse that we have.”
Everson previously worked with Werfel in the White House Office of Management and Budget, and the two have held some of the same positions over the years, including, now, the post of IRS commissioner. Werfel is “extremely well suited to lead this effort,” Everson said, but added that he’s going to face difficulties on many fronts.
The Inflation Reduction Act passed along party lines in August, at a time when Democrats controlled both houses of Congress. Republicans have been wary of how the funding will get used, and some have warned that the extra enforcement efforts will result in more audits for average taxpayers. IRS and Treasury officials insist that audits for households under $400,000 will not increase compared with historical levels.
After the spending plan’s release, Rep. Jason Smith, a Republican from Missouri who chairs the House Ways and Means Committee, was not convinced. “This is a punt, not a ‘plan,’ and it raises more questions than answers about how Americans’ tax dollars will be spent to go after working families and small businesses,” he said in a statement.
The IRS will definitely have challenges wooing workers away from the private sector, but those challenges are not insurmountable, said Natasha Sarin, a professor at Yale Law School. In December, Sarin finished work in the Treasury Department as a counselor to Treasury Secretary Janet Yellen focused on tax policy and administration.
“A lot of people spend time in government because of a deep sense of purpose and mission that I think the IRS can tap into,” she said. And it’s happening at the start of a new chapter for the agency, she added.
Werfel and the rest of IRS leadership need to find a way to appeal to prospective workers’ hearts as well as their wallets, Sarin said. “The first, second and third priorities are all in the direction of bringing on that expertise.”
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