The IRS said it's been tapped to help sanction Russian oligarchs.
But the underfunded and understaffed agency said it needs more workers to meet investigative needs.
Over the last decade, the IRS's budget and staff have shrunk dramatically.
The Internal Revenue Service has been tapped to help sanction Russian oligarchs — but the agency's chronic understaffing and underfunding might get in the way.
In a report, the agency said that the IRS's Criminal Investigation (CI) was called upon to help out the Department of Justice's "Kleptocapture" Task Force. That task force is "dedicated to enforcing the sweeping sanctions, export restrictions, and economic countermeasures" that the US has imposed on Russia over its invasion of the Ukraine, according to the DOJ.
In fact, the IRS said that it's "already in the process" of investigating Russian oligarchs — a natural fit, as the agency said it's been involved in over 20 investigations on oligarch money laundering since 2017.
The US is one of several Western countries to target the assets of Russian oligarchs. Those sanctions are an attempt to make Russia, specifically President Vladimir Putin, to feel the economic squeeze.
But the IRS's ongoing issues haven't faded away. The agency has seen its budget shrink by 20% in the last decade, per the Tax Policy Center. The number of staffers in Criminal Investigation shrunk by 25%, according to the agency's report. The IRS's underfunding and understaffing has already set the stage for a potentially hellish tax season, with many taxpayers telling Insider that they're still waiting on refund checks from years past.
Now, the IRS is saying it needs to ramp up its CI staff in the next five years by over 40% — bringing in a net of 1,300 more employees — "to meet its investigative needs." According to the New York Times, that would mean that Congress would need to pour $5 billion into the IRS.
That number doesn't account for staff like IT and data support, which also need help. The IRS said it currently has only five agents in CI who are able to use a software tool that lets them access international local government databases, which could be important in tracking down Russian oligarchs who are trying to skirt sanctions.
But funding the IRS has proven to be contentious. The Biden administration had proposed an $80 billion infusion for the agency as part of its Build Back Better legislation, which is currently languishing, and, according to centrist Democrat Sen. Joe Manchin, simply just "dead." The IRS did receive $12.6 billion in the recent government funding omnibus bill; however, an agency official reportedly told the New York Times that Republicans "blocked" an ask to include additional funding for criminal investigations in that bill.
The agency argued in its report that the return on investment is high for IRS funding. In 2021, CI agents seized $3.6 billion of stolen cryptocurrency, per the report, and has already seized more than that in 2022. In total, CI found $10.4 billion of tax fraud last year, according to the report — all while operating on a budget of about $600 million.
"CI, like the rest of the IRS, is in desperate need of stable, long-term funding to develop a deeper understanding of the global financial landscape and trace and seize assets that today are in the hands of criminals," the report concludes. "This is work that the IRS is well-equipped to do—once it has the resources to do it."
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