Effort to Revamp I.R.S. Struggles Despite Multibillion-Dollar Infusion

A multibillion-dollar federal effort to modernize the Internal Revenue Service has not yet solved the agency’s struggles to answer customers’ calls, ameliorate identity theft or process amended tax returns, the agency’s watchdog wrote on Wednesday in a report to Congress.

The annual report by the Office of the National Taxpayer Advocate comes as the agency faces a steep cut to the new funding that was intended to help it resolve longstanding issues, including backlogs of tax returns and lackluster customer service.

A spending agreement in Congress to fund the federal government would claw back about $20 billion of the $80 billion the I.R.S. received from the Inflation Reduction Act of 2022. Republican lawmakers are eager to rescind even more money from the agency, even as it tries to focus its energy on improving customer service and responsiveness to taxpayers.

Despite the persistent challenges, the national taxpayer advocate, Erin M. Collins, praised the I.R.S. for eliminating most of its backlog of unprocessed tax returns and improving its responsiveness.

“Overall, the magnitude of successes exceeded the areas of weakness in 2023, and most metrics showed significant improvement from the depths of the pandemic,” Ms. Collins said in a statement.

The report, which lays out 10 areas in which the I.R.S. needs to improve, described efforts to be more accessible as a “marathon” and said the agency had not been as successful on that front as its officials had suggested.