The Internal Revenue Service is putting its multi-billion-dollar modernization fund to good use by restoring training for its employees and replacing one of its oldest legacy IT systems, according to the head of the agency.

The IRS, tapping into nearly $60 billion in multi-year funds under the Inflation Reduction Act, is rebuilding its workforce and modernizing IT systems with a focus on improving service to taxpayers.

IRS Commissioner Danny Werfel, in a keynote address at the Association for Federal Enterprise Risk Management’s (AFERM) annual summit, said the IRS is seeing a promising return on investment with Inflation Reduction Act funds.

“It gives you a cautiously optimistic sense that we are regaining our footing and rebuilding,” Werfel said. “But the risk now is around ramping up and standing up with these funds to make sure that we’re rebuilding capacities in a way that is smart for the long run, but also is meeting taxpayer needs in the short run.”

The IRS plans to hire about 20,000 total employees by the end of fiscal 2024. It made progress toward its goal last year, when it hired about 5,000-6,000 new hires to staff up its call centers.

The IRS is now focused on staffing up its enforcement ranks.

But Werfel, in an interview following his keynote address, told Federal News Network that strengthening the IRS isn’t only about the total headcount of its workforce.

“I try to focus, when I think about hiring, not like how many employees are we going to hire, but are we going to achieve the mission,” Werfel said. “We have to keep making sure that we’re maintaining the right size. But so far, the impact has been positive.”

The IRS announced in September it plans to fast-track the hiring of more than 3,700 internal revenue agents across the country.  Agents focus on complicated tax compliance issues, and are trained to audit large corporations and complex partnerships.

Werfel said it’s been a “very busy fall,” in terms of holding recruiting and hiring events, as well as interviewing and onboarding candidates.

“I would expect hiring activity on the enforcement side to ramp up as we enter into 2024,” Werfel said in the interview.

Werfel told reporters this summer that the IRS is close to reaching 90,000 full-time employees, a staffing level the agency hasn’t seen in more than a decade.

However, the IRS still sees some challenges in getting new candidates. Werfel said some part of the challenge is there’s “far too much rhetoric” that’s disparaging to federal employees.

“It’s a harder environment to recruit people into the federal government when there’s a lot of headwind around federal employment,” Werfel said.

The IRS also expects to increase its capacity by making long-overdue technology upgrades.

“You might say, with all the technology, do you need all the same numbers of staff? Probably not, but we still need a lot of people,” Werfel said during his keynote speech.

Werfel said the IRS is using the Inflation Reduction Act funds on “rebuilding and resetting” its training program — a budget item that saw major cuts over the years.

Werfel said he’s trying to take “as many of these courses as possible,” and is focused on leading the agency with an “employee-centric view of the IRS”

“We do a pretty good job, for example, in training our customer service reps on empathy with taxpayers — but we could do more? And we do a pretty good job with training our managers on what’s in our collective bargaining agreement, but we could do a little bit more,” Werfel said.

“The leaders that inspired me most in the federal space were those that understood the largest impact they were going to have is on strengthening the organization that they were leading. And to do that, I think you have to put yourself into the shoes of the employees the best you can,” he added.

The agency is also dealing with lawmakers who cut IRS funding in the Inflation Reduction Act earlier this year, and are pushing for further cuts.

Congress granted the IRS $80 billion in multi-year modernization funds when it passed the Inflation Reduction Act, but reduced those funds to about $60 billion as part of a deal with the Biden administration to raise the debt ceiling.

The House on Nov. 2 passed a bill that would rescind about $14 billion from the IRS’ multi-year modernization fund, and would repurpose the funds as aid to Israel.

To convince skeptics in Congress from clawing back more IRS funds, Werfel said the agency is focused on delivering on goals that are “unassailable, and shouldn’t be objectionable.”

That includes making it easy for taxpayers to reach the IRS when they need help, tracking down a growing number of wealthy individuals and large corporations evading their taxes and addressing a growing risk of tax scams.

“The second part is delivering on that agenda and saying, if you provide those funds, and you don’t claw them back, we will be able to be more accessible,” Werfel said.

IRS next year will also test out a long-awaited update to the Individual Master File, its authoritative data source for individual tax account data.

Werfel said the IRS will turn on a modernized version of the IMF for the first time in April 2024 – after the tax filing season — and run it in parallel with its legacy system. Werfel said the IRS hopes to have the updated IMF up and running by the following filing season.

“As we move into this next phase, taxpayers should start to see increasing functionality on that individual account and being able to get more and more stuff done with the IRS without ever picking up the phone or without ever walking into a walk-in center. We’re excited about that,” Werfel said.

Werfel said updating the IMF is key to giving taxpayers a “fully digital experience” that’s on par with the online banking experience that most individuals have come to expect from financial institutions.

“All of that is possible if we have a modern Individual Master File that is feeding information safely into that web environment,” Werfel said. “On an old system that’s COBOL-based, with non-standard data that does not have that kind of readiness to move information safely and cleanly into a web environment, we’ll never get to that online banking vision that we have.”

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