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The effect of the November presidential election on IRS funding

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2 years ago

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Like most federal agencies, the Internal Revenue Service is funded through annual appropriations. However, in 2022 the IRS also received $80 billion of multiyear funding under the Inflation Reduction Act of 2022. In the two years since the IRA was enacted, approximately $20 billion was clawed back. 

Depending on the outcome of the November presidential and congressional elections, the amount of IRA funding could be reduced further. This article provides a high-level overview of how the IRS is funded and considers how the IRS’s budget might fare after the next election.

Current IRS funding

While IRS funding through the congressional appropriations process has remained relatively constant (fluctuating between around $11 billion to a bit more than $12 billion), since 2010 the amount has decreased in inflation-adjusted dollars. This decrease in funding has resulted in significant reductions in the IRS’s workforce (which reduced taxpayer service and enforcement capabilities) and challenges in modernizing outdated technology. Meanwhile, the tax gap (the difference between tax owed and the tax paid on time) is increasing and was estimated to be $688 billion in tax year 2021.

IRS funding under the IRA was enacted to supplement the agency’s annual appropriations to provide a consistent source of multiyear funding to facilitate improvements and enable better strategic planning. Almost half of the funding from the IRA (about $46 billion) was directed to be used for enforcement, with the remainder allocated to taxpayer service, business systems modernization and operations support. 

Under revenue-estimating rules, allocating money to enforcement raised revenue (about $180 billion) that was used to offset the cost of the IRA (which mostly was attributable to clean energy tax benefits). So far, the IRS has used a good portion of the IRA funding, including to help reduce processing backlogs and overall taxpayer service deficits, and it is estimated that after the $20 billion clawback, approximately $40 billion remains. Under the IRS’s strategic operating plan, enforcement funding is focused on large corporations, complex partnerships and high-net-worth individuals, as well as international tax compliance and high-income nonfilers.

Partisan view of IRS funding

The Democrats controlled both chambers of Congress and the White House when the IRA was enacted, but Republicans won control of the House in 2023. While Democrats view the IRS’s IRA funding as separate from the agency’s annual appropriations, Republicans view IRS funding more holistically and have attempted to reduce total agency funding by reducing both IRA funding and IRS appropriations. This effort has been partially successful and likely will continue.

The Biden-Harris administration has proposed increasing the IRS’s annual appropriations, requesting $12.32 billion for fiscal year 2025, and increasing and extending multiyear funding through 2034. 

House appropriators have proposed IRS appropriations below the amount requested by the Biden-Harris administration, including a $2 billion reduction in funding for enforcement, but to date have not proposed additional clawbacks of IRA funding. In contrast, Democrats in the Senate support IRA multiyear funding of the IRS and sustained annual appropriations to preserve gains.

Although Donald Trump has not spoken specifically about IRS funding during this campaign cycle, the candidate’s campaign website, campaign staff and surrogates have said that a Trump administration would use impoundment (essentially, not spending appropriated funds) and would continue plans started in 2020 to shrink the federal bureaucracy.

These broader plans could be used to significantly reduce IRS funding and staffing. Budget requests for the IRS for fiscal years 2018 through 2021, when Donald Trump was president, were lower than prior years.

Even if IRS funding survives the fiscal year 2025 congressional budget process relatively unscathed (for instance, agency annual appropriations don’t take too great a hit and there isn’t an additional clawback of IRA money), the fiscal year 2026 budget process begins in February 2025, which gives Congress another opportunity to address IRS funding during the height of discussions about how to address expiring provisions enacted by the Tax Cuts and Jobs Act of 2017.

White House

Extending all TCJA provisions is estimated to cost $4.6 trillion, and differences exist regarding whether offsets should be required. A discussion of offsets surely will include IRS annual appropriations and the agency’s multiyear funding under the IRA. Even if not tapped as an offset for the cost of extending expiring provisions under the TCJA, the IRS’s funding might be an attractive offset to pay for nontax-related priorities. If TCJA negotiations continue into 2026 (or even 2027), which is possible, tax and IRS funding could be an issue in the November 2026 midterm elections.

IRS funding after the election

While no one knows for certain the outcome of the elections in November, four possible outcomes generally exist: Two where one party or the other wins control of the House, Senate and White House, and two where one party or the other controls the White House, but the Congress is either divided or the party that didn’t win the presidency controls each chamber. Each scenario could have an impact on IRS funding, as follows:

  1. Republicans win the White House, House and Senate: There is a high risk that IRS funding will be reduced below levels appropriated in recent years and remaining IRA funding could be completely rescinded. This conclusion is based on recent appropriations proposals by congressional Republicans and Donald Trump’s campaign pledge to reduce government spending and the number of federal employees. 
  1. Republicans win the White House but lose one or both chambers of Congress: The result here is likely to be the same as above. This is because Donald Trump has pledged to reduce government spending and the number of federal employees. Even if Congress enacts a steady or increased level of annual IRS funding with a veto-proof majority, Donald Trump has stated that he would use impoundment to rescind or defer spending.
  1. Democrats win the White House, House and Senate: It is highly unlikely that IRA funding will be reduced (and it could even be increased), and the IRS’s appropriations for fiscal year 2025 and 2026 likely will be relatively steady or even increase. 
  1. Democrats win the White House but lose one or both chambers of Congress: Even though the Biden-Harris administration agreed to reductions in IRA funding in 2023 and 2024, the amount remaining after the clawbacks and IRS investments so far leave little room for concessions. However, IRS annual funding levels could be reduced, particularly if Republicans control the House and the Senate. 

Based on these possible outcomes, the following matrix illustrates what might happen to IRS funding in 2025 and 2026 in each scenario:

Party in control of White House Party in control of the House  Party in control of the Senate Risk of reduction of IRS annual funding levels Steady or increased levels of IRS annual funding Risk of reduction of IRA funding

R

R

R

X

X

R

D

D

X

X

R

D

R

X

X

R

R

D

X

X

D

D

D

X

D

D

R

X

D

R

D

X

D

R

R

X

The November elections are fast approaching. While it’s possible that an individual’s view of the IRS and how it spends the money it receives from Congress will affect how they vote, it’s more likely that the converse will be true — how people vote on other issues will influence IRS funding.

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Accounting

AI-Driven Automation and Continuous Accounting Frameworks

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1 day ago

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August 15, 2026

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The accounting profession is undergoing a fundamental structural transition as enterprise finance departments shift from periodic month-end closes toward automated continuous accounting models. By integrating specialized machine learning algorithms directly into enterprise resource planning (ERP) platforms, chief accounting officers are transforming financial reporting from a retrospective exercise into a real-time operational asset.

The Shift from Periodic Close to Continuous Financial Reporting
Traditional accounting workflows heavily relied on manual data reconciliation, spreadsheet calculations, and multi-week closing cycles at the end of each fiscal period. In contrast, continuous accounting frameworks utilize automated software agents to process, validate, and post transactional data in real time as business activities occur.

Automated bank reconciliation tools cross-reference incoming bank feeds, invoice records, and purchase orders automatically. By resolving transactional variances instantly throughout the month, corporate accounting teams eliminate the traditional workload spikes associated with quarterly and annual closes.

Machine Learning in Audit Trails and Anomaly Detection
Advanced natural language processing (NLP) and machine learning tools are redefining internal audit and financial control environments. Automated systems analyze 100% of general ledger entries, identifying anomalous transactions, duplicate payments, and unauthorized journal entries in real time.

Rather than relying on random statistical sampling, corporate internal auditors can focus their attention on high-risk flags automatically surfaced by algorithmic monitoring platforms. This continuous risk assessment strengthens internal controls over financial reporting (ICFR) and significantly reduces fraud risk.

Evolving Roles for Accounting Professionals
As routine data entry and manual reconciliation tasks become fully automated, the skill set required for accounting professionals is shifting toward data analysis, system design, and strategic business advisory.
– Systems Governance: Accountants are increasingly responsible for monitoring algorithmic accuracy and managing data integration pipelines.
– Business Partnership: Finance professionals leverage real-time financial dashboards to advise operational leaders on margin management and working capital allocation.
– Regulatory Compliance Management: Accounting teams utilize automated platforms to ensure compliance with dynamic tax codes and international accounting standards.

Core Implementation Recommendations
1. Deploy Automated Reconciliation Tools: Integrate continuous transaction processing modules into existing enterprise ERP architectures.
2. Establish Algorithmic Governance Controls: Implement strict internal testing protocols to ensure automated accounting rules comply with GAAP/IFRS standards.
3. Reskill Accounting Teams: Invest in training finance staff on data analytics, workflow automation, and predictive financial modeling.

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Accounting

Global ESG Reporting Standards and Double Materiality Compliance

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7 days ago

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August 9, 2026

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Corporate accounting departments face expanding reporting expectations as international sustainability disclosure standards achieve regulatory enforcement across major global jurisdictions. Chief Accounting Officers (CAOs) and corporate controllers are establishing rigorous internal accounting controls to treat Environmental, Social, and Governance (ESG) metrics with the same data precision, auditability, and governance as traditional financial statements.

Regulatory Harmonization Under Global Sustainability Frameworks
The implementation of standardized sustainability reporting frameworks—notably rules established by international sustainability accounting boards—has created unified expectations for public and large private enterprises. Corporations must report standardized metrics covering greenhouse gas emissions (Scope 1, 2, and material Scope 3), energy utilization, workforce demographics, and supply chain governance.

In Europe and other participating international jurisdictions, double materiality principles are mandatory. Under double materiality, organizations must report both how external sustainability risks impact corporate financial performance, and how internal corporate operations affect surrounding environmental and social structures.

Integrating Sustainability Metrics into Core ERP Systems
To provide auditable non-financial data, enterprise organizations are integrating specialized carbon accounting and ESG management platforms directly into core ERP systems. Automated data collectors capture energy utility invoices, logistics fuel consumption metrics, and vendor compliance records in real time.

Establishing automated, traceable data pipelines ensures that non-financial reporting is supported by clear audit trails. This structured approach allows external financial auditors to provide reasonable assurance on sustainability disclosures during annual corporate reporting cycles.

Financial Impacts and Capital Market Disclosure
Accurate ESG reporting directly influences corporate cost of capital and institutional credit ratings. Commercial lenders and institutional asset managers systematically incorporate sustainability metrics into risk pricing models. Companies that demonstrate transparent, verifiable progress in operational energy efficiency and climate risk mitigation benefit from expanded access to green bond markets and lower debt pricing.

Action Steps for Accounting Leadership
1. Implement Double Materiality Frameworks: Conduct comprehensive assessments to identify material financial and operational sustainability metrics.
2. Build Auditable Non-Financial Data Pipelines: Automate ESG data collection within core accounting software to ensure data integrity.
3. Align Sustainability with Annual Financial Filings: Prepare non-financial disclosures concurrently with financial statements to satisfy regulatory audit expectations.

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Accounting

Modernizing Internal Controls: Machine Learning and Continuous Monitoring in Auditing

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2 weeks ago

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August 5, 2026

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Internal audit departments and corporate risk managers are modernizing internal control frameworks by shifting from periodic sampling techniques to continuous monitoring and machine learning analytics. As operational data volumes increase across enterprise organizations, automated control testing ensures financial integrity, prevents corporate fraud, and streamlines annual audit engagements.

The Limitation of Periodic Audit Sampling
Historically, internal and external auditors evaluated internal controls by reviewing random samples of financial transactions—often analyzing less than five percent of total ledger entries. In complex enterprise environments, periodic sampling methods carry inherent risks of overlooking localized financial misstatements, unauthorized disbursements, or operational control breakdowns.

In 2026, progressive internal audit functions are utilizing automated continuous monitoring platforms that evaluate one hundred percent of financial transactions in real time. Continuous control auditing systems continuously monitor general ledger entries, procurement approvals, and expense reimbursements across all operating subsidiaries.

AI-Powered Fraud Detection and Anomaly Identification
Machine learning models trained on historical corporate financial data excel at identifying subtle transactional anomalies that indicate potential fraud or operational error. Automated systems instantly flag duplicate invoice payments, unapproved vendor creation, unusual journal entry timing, and unauthorized override of authority thresholds.

When an anomaly is detected, the automated auditing platform generates an instant risk alert, allowing internal audit teams to investigate root causes immediately. Early detection prevents minor operational errors from escalating into material weaknesses in financial reporting.

Streamlining External Audit Preparation
Continuous internal control monitoring delivers significant benefits during annual external financial audits. External audit firms can review continuous audit logs and automated control testing documentation, reducing the time required for manual field testing.

This integrated approach lowers overall audit compliance fees, reduces administrative burdens on corporate accounting staff, and provides senior management and audit committees with real-time visibility into the organization’s overall risk profile.

Core Implementation Guidelines
1. Transition to 100% Data Testing: Replace legacy sampling methods with automated continuous audit monitoring systems.
2. Deploy Anomaly Detection Algorithms: Implement machine learning models to identify unauthorized transactions and operational control overrides.
3. Align Internal and External Audit Workflows: Coordinate continuous control testing protocols with external auditors to optimize annual compliance cycles.

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