IRS Boosts Audits: How to Know If You’re a Target

The IRS has announced a plan to increase audits as a result of an uptick in tax fraud. Some taxpayers are more likely to be targeted than others. Here’s how to know where you stand.

IRS Promises Operational Changes

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After the IRS received $80 million to improve its operations, the agency has promised significant changes that it says will increase revenue and improve the overall IRS experience.

Audits a Main Focus

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The biggest change will involve the number of audits performed by the IRS each year. Danny Werfel, IRS commissioner, explained the details of the new plan to improve the agency.

Responding to “Years of Underfunding”

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After “years of underfunding,” Werfel said the IRS’s performance had suffered. In response and with the help of the $80 million endowment, the plan is to spend three years making significant changes to its operations.

Low- and Middle-Class Taxpayers Unaffected

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The increase in audits will target a specific subset of taxpayers. Luckily for most Americans, those making under $400,000 per year will not be at any increased risk of being audited.

More Audits for the Rich

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However, for taxpayers with income higher than that threshold and large companies, audits will come at up to ten times the frequency as before.

Rates of Increased Audits

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For corporations who hold more than a quarter of a million dollars in assets, the rate of audits will triple. Partnerships which have assets in excess of $10 million will be audited at ten times the current rate.

Wealthy Individuals Will See 50% Increase

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Finally, American taxpayers who earn over $10 million will have 50% more audits. The IRS was clear in its announcement that taxpayers outside of those groups would not be audited more frequently.

Commissioner Promises Non-Wealthy Individuals and Small Businesses Will Not Be Targeted

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“There is no new wave of audits coming from middle- and low-income [individuals], coming from mom and pops. That’s not in our plans,” Commissioner Werfel said.

IRS Intends to Send a Message

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Werfel said the idea is to send a message to wealthy individuals and corporations that they are being more heavily scrutinized to attempt to curb fraudulent filing.

“It Sets an Important Tone and Message”

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“It sets an important tone and message for complex filers, high-wealth filers, that this is our focus area,” Werfel said.

IRS to Increase Hiring Efforts

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Another area of focus for the IRS with the new funding is in hiring new talent to fill seats that have been empty for years. 

12,000 Seats to Be Filled

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According to Werfel, there is a plan to increase employment numbers by approximately another 12,000 hires. The IRS hopes to employ a total of 102,500 people by the end of the effort.

“That Number Won’t Even Be a Record High”

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“That number won’t even be a record high for the IRS workforce; it’s well below the numbers from the 1980s and early 1990s,” Werfel noted.

An Attempt to Clear Up Myths

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This clarification was necessary after the IRS became the subject of political posturing and pervasive myths surrounding its future.

Unfounded Rumors

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Following the $80 million award that was given to the IRS as a result of the Inflation Reduction Act, there were Republicans behind rumors that the IRS planned to “supersize” itself with “87,000 new IRS agents to audit Walmart shoppers.”

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The post IRS Boosts Audits: How to Know If You’re a Target first appeared on Liberty & Wealth.

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The content of this article is for informational purposes only and does not constitute or replace professional financial advice.

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