IRS Warns It Is Ramping Up Audits

( – Lawmakers passed the Inflation Reduction Act (IRA) in 2022. The legislation provided the IRS with $80 billion in new funding. The federal agency is now getting ready to ramp up audits.

On May 2, IRS Commissioner Danny Werfel outlined the agency’s plans for spending its new funding. The money has already helped the agency hire more customer service representatives. The national health crisis caused months-long delays for taxpayers, but the agency answered more taxpayer calls this season.

According to the commissioner, the agency also increased its enforcement, which led to the collection of $520 million from rich taxpayers who owed money or hadn’t filed taxes yet. He said the agency plans to sharply increase its audits on people who make more than $400,000 annually.

Werfel said the IRS will triple audits on large corporations with more than $250 million in assets. Audits for those companies will increase to 22.6% in 2026, a significant rise from 8.8% in 2019. Wealthy people with an income of more than $10 million will see audit rates increase by 50% to 16.5%, up from 11% in 2019. Large partnerships with assets over $10 million will also see their audit rates increase, rising to 1% in 2026 from 0.1% in 2019.

The Associated Press reported that Werfel, who was sworn into office last year, said there won’t be a “new wave of audits” on middle and low taxpayers. He said that was not in the agency’s plans in “any way shape or form.”

The agency’s plans stated that it is “overhauling compliance efforts to advance [its] commitment to fair, equitable, and effective tax administration” and to ensure it’s “accountable to taxpayers” around the country. Additionally, the agency will address reports that black people are audited more often than white people. Werfel told reporters that the audits that discriminatory audits “degrade trust in [the] tax system.”

The commissioner also stated that while the billions in funding have helped the agency, it still needs to “do much more to make improvements and transform the IRS” so it actually benefits taxpayers.

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