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More IRS Audits Coming But Who Will They Target?

The “Inflation Reduction Act”, if passed by the House and signed by the President, will provide $80 billion of funding to the IRS, with $45.6 billion of it earmarked fir strengthening tax collection and enforcement. This would mean an increase of 87,000 new agents, almost doubling the current IRS employee base of about 94,000. An analysis by the Congressional Budget Office estimates that the IRS could collect $203 billion through the efforts of the new agents. Said differently, for every $1 spent on enforcement, the government could collect an estimated $4.50 in revenue. The IRS has indicated that they are designing an enforcement action that would target corporate and high income taxpayers and not those making less than $400,000.

There appears to be some skepticism as to whether the IRS’ focus would be diverted instead to low and middle income earners instead. As indicated in our earlier post, the IRS has historically depended on audits of lower and middle income taxpayers for additional revenue because they take less resources to pursue and are often not contested. Additionally, only about 2% of all taxpayers earn more than $400,000 even though they make up 25% of the nation’s income while the remaining 98% make up about 75% of the nation’s income. Given these stats plus the IRS history, there is reason to be concerned that the IRS will ultimately continue to target low and middle income class taxpayers.  

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