The Tax Times: IRS To Increase Audit Rates By 50% On Wealthy & Large Corporations

Tuesday, May 7, 2024

IRS To Increase Audit Rates By 50% On Wealthy & Large Corporations

IRS Commissioner Danny Werfel offered some specifics about the agency's plans for audits of wealthy individuals and corporations at a press conference last week, Dow Jones Marketwatch reported. These figures can be found in the IRS's recently published s trategic operating plan update and update supplement.

By The Time Taxpayers File Their 2026 Taxes, The IRS
Plans To Implement A 50 Percent Increase In The Audit
Rate For Households With Incomes Of $10 Million
And Up, Compared To 2019, As Well As A Near
Tripling Of The Rate Of Corporate Audits.

That means that it plans to audit 16.5 percent of the 2026 returns for households with total positive income of at least $10 million, up from 11 percent in 2019. The agency plans to audit 22 percent of returns from corporations with at least $250 million in assets, up from 9 percent in 2019.

Werfel also spoke about the agency's hiring plans through the end of the decade, MarketWatch reported. The IRS now has approximately 90,000 full-time employees, up from around 79,000 employees in fiscal year 2022, he noted. Werfel is seeking a headcount of around 102,500 at the end of this decade, he said. "We believe that figure represents a right-sized IRS," he said.

At the same time, the agency will not increase audit rates for individuals and small businesses making under $400,000, Werfel said, adding that audit rates for those taxpayers remain at historically low levels.

The IRS also plans to expand enforcement efforts by increasing its total trained staff, identify and implement strategic options to rapidly increase enforcement activities, including nonaudit activities, and expand efforts involving digital assets, including releasing proposed regulations on broker reporting, according to the update supplement.

The agency's recent enforcement efforts set an important tone for large and complex filers and provide incentives for organizations to be diligent in ensuring that they're meeting their tax responsibilities, Werfel said.

The IRS is also planning to deploy two pilot models this year intended to improve audit outcomes and reduce racial disparities, according to the update. The agency is committed to ensuring that it is covering a variety of areas of equity in tax administration, Werfel said.

Last year, the IRS started auditing 76 of the largest partnerships in the U.S., including hedge funds, publicly traded partnerships and large law firms and those audits are ongoing this year, according to the annual update.

The agency has made an incredible amount of progress since receiving the Inflation Reduction Act's nearly $80 billion funding boost in 2022, Werfel said, even with President Joe Biden and former House Speaker Kevin McCarthy, R-Calif., agreeing to claw back $21.4 billion between 2023 and 2025.

"These efforts will continue to accelerate as we get deeper into the strategic operating plan and as we continue the work made possible by Inflation Reduction Act funding," Werfel told reporters.

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