The United States Internal Revenue Service (IRS) announced on Thursday (May 2nd) that it is intensifying its audit efforts to combat tax evasion and increase revenue for the U.S. Treasury. However, this does not mean that all groups of taxpayers will face more audits.
The IRS detailed a plan utilizing the $80 billion funding provided by the Inflation Reduction Act signed by President Biden in 2022 to hire more auditors, significantly increasing audit rates for wealthy taxpayers and large corporations.
With the help of this funding, the IRS reported that during the tax filing season that ended on April 15th, they received more calls from taxpayers and increased audit efforts, collecting $520 million from wealthy taxpayers who had either not filed their taxes or still owed taxes.
IRS Commissioner Danny Werfel emphasized that the agency is focusing its audits on the wealthy and large companies, including those in the following groups:
– Individuals with an income exceeding $10 million
– Companies with assets exceeding $2.5 billion
– Complex partnership enterprises with assets over $10 million
– Companies and high-income taxpayers using public resources for personal purposes
While audit rates are expected to increase significantly, the IRS stated that they will not exceed the levels of 2010 due to the increased and more complex filings from large corporations, partnership enterprises, and wealthy individuals.
Republicans oppose the $80 billion funding increase for the IRS under the Inflation Reduction Act supported by Democrats, arguing that this funding would lead to the hiring of 87,000 new employees by the agency, facilitating the Biden administration’s ability to scrutinize small businesses and regular households.
Commissioner Werfel has repeatedly stated that the IRS is committed to protecting small businesses and households with annual incomes below $400,000 from the impact of rising audit rates. He mentioned during a phone conference with reporters on Thursday that the audit rates for these Americans will not exceed the levels of 2018, which was recorded as a year with historically low audit rates.
“As I have reiterated, there will be no new round of audits for low and middle-income taxpayers and families. This is not part of our plans in any way,” Werfel said.
In order to enhance audit efforts, the IRS is recruiting accountants, engineers, economists, data scientists, lawyers, and tax experts specifically required for complex audits.