New tax brackets and standard deductions are now in effect, which will slightly boost paychecks and lower income tax for many Americans. Why it matters: The IRS changes, which include other tax provisions,

The IRS has unveiled its annual inflation adjustments for the 2025 fiscal year, impacting over 60 tax provisions.

To avoid a government shutdown, the IRS lost out on $20 billion in funding, limiting its ability to track down tax dodgers.

The IRS adjusts tax brackets for inflation annually to stop taxpayers being pushed into a higher income tax bracket without an increase in real income. There are seven income brackets that earners can fall into: 10, 12, 22, 24, 32, 35 and 37 percent, and they will remain unchanged throughout 2025.

Congress revoked an additional $20 billion from the Internal Revenue Service last week when lawmakers averted a government shutdown, a cut that may undo many of President Joe Biden’s efforts to improve customer service at the tax agency and train fresh scrutiny on wealthy tax cheats.

Republicans have long targeted the tax agency, and their cuts will hurt its efforts to go after rich tax evaders and improve the IRS’s functionality. It’s their second successful cut from President Biden’s $80 billion funding boost to the agency in the 2022 Inflation Reduction Act, as the GOP took away an earlier $20 billion in a 2023 budget deal.

Biden and congressional Democrats gave the IRS $80 billion in the 2022 Inflation Reduction Act, but Congress rescinded $20 billion as part of a 2023 budget deal.

The IRS is seeking to update its regulations involving an excise tax imposed on sales by manufacturers, producers, or importers of certain drugs if they refuse to comply with the Medicare Drug Price Negotiation Program.

No one loves the Internal Revenue Service, but we need the much-maligned agency having enough resources to make sure that everyone pays their fair share of taxes to support Uncle Sam and Republicans should not slash that funding.

Although you may not be too sympathetic to the plight of the IRS, the reality is that the loss of these funds is likely to have a real-world impact on what the agency can do. Adeyemo explained some of the things that would happen if the money is not restored:

The IRS estimates there will be 8,000 fewer audits of wealthy taxpayers and businesses though 2029 without the sidelined $20.2 billion.

As Congress fought over the spending bill, Republicans snuck in a passage to gut funding for the IRS. And Democrats didn’t catch it.