Biden’s IRS to Increase Scrutiny on Super Rich, Big Corporations
TL/DR –
The Internal Revenue Service (IRS) is planning to increase audit rates to ensure that large corporations and wealthy taxpayers are not evading their tax responsibilities. The agency plans to increase the number of audits of taxpayers earning over $10 million annually by 50% for tax year 2026, with the audit rates of corporations with assets over $250 million expected to triple. These audits will be funded by President Biden’s Inflation Reduction Act and will not apply to households earning under $400,000 annually.
The IRS Boosts Audit Rates for Wealthy Taxpayers and Large Corporations
The Internal Revenue Service (IRS) recently outlined its plans to augment the audit rates for wealthy individuals and large corporations. This move aims to ensure tax accountability among these entities.
By 2026, the IRS is set to increase audits of taxpayers earning above $10 million annually by 50%. Additionally, corporations with assets exceeding $250 million will possibly see their audit rates tripled. Substantial increases are also anticipated for business partnerships holding assets above $10 million.
Funding for these additional audits will be provided by President Biden’s Inflation Reduction Act (IRA). The Act seeks to compensate for a decade of substantial budget cuts to the IRS, largely due to Republican-led decisions in Congress.
Addressing the Tax Gap and Collecting Unpaid Taxes
One of the significant challenges faced by the IRS is the tax gap – the difference between taxes owed and taxes paid. This gap has grown to over $600 billion annually. The agency has used the IRA funds to collect over $520 million from wealthy individuals who had significant unpaid tax bills. Tax revenues are projected to increase by nearly $561 billion from 2024 to 2034 thanks to IRA-funded enforcement measures.
Investing in IRS Personnel and Infrastructure
To facilitate these audits, the IRS is hiring additional experts including accountants, economists, data scientists, and attorneys. By 2029, the agency expects to add an extra 14,000 full-time positions. However, households earning less than $400,000 annually will not be subject to the increased audits.
Opposition and Further Improvements
Despite the benefits, some Republican lawmakers continue to oppose IRS funding. They previously negotiated a reduction in the original IRA funding allocation during the nation’s debt ceiling discussions.
Moving forward, additional IRA funds will be utilized to enhance IRS services for taxpayers. Recent improvements include a 92% service level on the IRS toll-free line with hold times reduced to under two minutes. More enhancements are planned for the “Where’s My Refund” online tool, among other services.
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