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2023 Tax Resolution Statistics [Infographic]

September 20, 2022

There are many good reasons to consider adding tax resolution services to your practice. In addition to the satisfaction of helping your clients through a stressful situation, and escaping the high-stress daily grind of tax preparation, tax resolution allows you to add an additional revenue stream beyond annual tax returns and stabilize and grow your ‘off-season’ revenue. The demand for tax issue resolution is constant and growing, and there are several key trends and tax resolution statistics that will drive a continued demand for tax resolution services.

2023 Tax Resolution Outlook:

The Inflation Reduction Act has been passed into law

The Act provides $80 billion in funding to the IRS through FY 2031, allowing the agency to hire thousands of agents and revamp decades-old technological systems. This funding will cover a wide range of functions, but audits and enforcement are included. Per Janet L. Yellen, Secretary of the Treasury, she was quoted in Reuters stating, “The act includes much-needed funding for the IRS to improve taxpayer service, modernize outdated technological infrastructure, and increase equity in the tax system by enforcing the tax laws against those high-earners, large corporations, and complex partnerships who today do not pay what they owe.”

Temporary Tax Benefits Expire

The pandemic and federal stimulus led to a huge spike in the number of Americans who either owed no federal income tax or received tax credits from the government. According to the Urban-Brookings Tax Policy Center, 107 million households owed no income taxes in 2020, up from 76 million — or 44% of all taxpayers — in 2019. “It’s a really big number,” said Howard Gleckman, a senior fellow at the Tax Policy Center. “It’s also really transitory.” Gleckman said the main reasons for the spike — high unemployment, large stimulus checks, and generous tax credit programs — will largely expire after 2022, so the share of nontaxpayers will fall again starting next year. The share of Americans who pay zero income taxes is expected to fall back down to 42% in 2022 and remain at around 41% or 42% through 2025, “assuming the economy continues to rebound and several temporary tax benefits expire as scheduled,” Gleckman said.

Tax Delinquency

Owing the IRS is more common than you might think: 17% of federal taxes go unpaid each year. This is often under-reported in comparison to other types of debt, like credit cards and student debt. The Internal Revenue Service (IRS) reported that at the end of the fiscal year 2021, there were 10.2 million delinquent taxpayer accounts. Some of the top reasons cited include tax liabilities being more than expected; in addition to unfiled taxes and divorce. It is likely that the number of delinquencies will grow as the gig economy continues (rideshare drivers, freelancers, contractors) and with cryptocurrency enforcement expected to rise.

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ABOUT THE AUTHOR

Suzanne Stone

Managing Partner at IRS Solutions | Tax Resolution Specialist| Enthusiastic Community Leader

Suzanne Stone, Managing Partner at IRS Solutions Software, combines 16 years of expertise in tax resolution with a passion for community service. She has been pivotal in developing software solutions that significantly enhance the efficiency and effectiveness of tax professionals. Beyond her corporate achievements, Suzanne is passionately involved in philanthropy, working with organizations like Soroptimist International and Project Delta. Her efforts in these groups are focused on creating meaningful changes in the lives of women and veterans. Suzanne is committed not just to business success but to fostering a supportive professional community.