IRS Plans To More Than Double Its Audit Rate of Wealthy Taxpayers

The IRS is gearing up to intensify its scrutiny of wealthy individuals and sizable corporations as part of a broad initiative to combat tax evasion. The objective of the tax collection agency is to significantly raise audit rates for taxpayers earning above $10 million by more than 50%. This move is set to elevate the audit rate for such individuals to 16.5% by 2026, a notable increase from the 10% recorded in 2019. Furthermore, there are plans to almost triple the audit rates for large corporations possessing assets exceeding $250 million, alongside a tenfold increase in audit rates for business partnerships with assets surpassing $10 million.

“In tandem, the IRS reiterates its commitment not to escalate audit rates for small businesses and individuals earning below $400,000, with these rates remaining historically low,” the agency asserted. The allocation of funds for these enhanced enforcement measures was incorporated into the Democrats’ legislation concerning healthcare and climate change expenditures – known as the Inflation Reduction Act – which President Biden ratified in 2022. This injection of financial resources aims to enhance tax compliance among major corporations and affluent individuals, thereby narrowing the estimated $600 billion tax gap.

According to Reuters, the IRS has outlined plans to allocate $9.3 billion in fiscal 2025, followed by $7.3 billion in fiscal 2026, with a cumulative total of $57.82 billion over the decade leading up to fiscal 2031. The bolstered funding for the IRS has sparked vehement opposition from Republicans and other detractors, who argue that an expanded IRS represents a form of egregious government intrusion that could ultimately harm lower-income Americans.

This contention arises from the fact that the IRS disproportionately focuses on auditing low-income Americans annually. This asymmetry primarily stems from high-income taxpayers engaging in intricate investments, which can obscure the disparities between taxes owed and paid versus taxes reported and paid. Despite criticisms, the IRS has consistently affirmed its commitment to adhere to Treasury Secretary Janet Yellen’s directive of refraining from increasing audit rates for Americans earning less than $400,000 annually – a stance reiterated by the agency when it unveiled efforts to crack down on 1,600 millionaires and 75 large businesses reportedly owing millions in back taxes.

“As I’ve reiterated time and again, there is no impending surge of audits targeting middle- and low-income [taxpayers], or small businesses,” emphasized IRS Commissioner Danny Werfel during a press briefing on Thursday. “Such actions are not part of our agenda in any manner or form.”

{Matzav.com}