On July 10, the Senate Appropriations Committee cleared the FY 2009 Financial Services and General Government Appropriations legislation which approved $11.5 billion for the Internal Revenue Service (IRS), constituting 91 percent of the Treasury Department’s $12.7 billion allocation for the upcoming year.

This appropriation is a significant budget increases for the IRS—nearly $163.3 million more than the president's request and $430.3 million more than the 2008 budget. The budget will fully fund IRS enforcement at about $7 billion, including $1.9 billion in operations-support funding. A significant chunk of that increase, $337.3 million, would go directly to expanding IRS’s enforcement operations. Additionally, the Senate bill will give taxpayer services approximately $2.2 billion, an almost $63.4 million increase from last year’s budget.

During the debate, Financial Services and General Government Subcommittee Chairman Richard Durbin (D-Ill.) stated, "Shortchanging resources available for taxpayer services sends the wrong signal, and is inconsistent with the equation at the centerpiece of the IRS’ strategic plan: Service + Enforcement = Compliance."

With this budget increase, IRS is expected to increase audits, especially on high-income taxpayers and self-employed individuals. Stricter filing rules and more stringent audits may spur the IRS to penalize small businesses for unintentional transgressions.

According the IRS Oversight Board the increased amount of funding will support three of the IRS’s strategic goals:

1. Improving taxpayer services,


2. Enhancing enforcement of the tax laws, and


3. Modernization.

Instead of increasing compliance and minimizing the tax gap, NSBA believes this increase will add additional and unnecessary burdens on already over-burdened small-business owners.