The Internal Revenue Service (IRS) is set to crack down on wealthy individuals as a part of a plan created to use $80 billion in funding it will receive under the Inflation Reduction Act.
- The IRS has unveiled a new Strategic Operating Plan running to the FY 2028 tax year.
- President Biden's Inflation Reduction Act allocated $80 billion over a decade for IRS reforms.
- Audits of wealthy individuals have plummeted in recent years because of lack of resources, the organization said.
The IRS was allocated more money for staffing and technology and part of the resources will go to more audits of high-net-worth individuals, it said Thursday. Additional staff to “unpack the complex filings” of wealthy individuals.
The IRS noted a “growing chasm” between its 2,600 high net worth (HNW) auditors and the huge number of individuals and corporations that submit taxes that fall in that category. The IRS said 30,000 individuals make more than $10 million and they will come under increased scrutiny through these new initiatives.
The Inflation Reduction Act was signed into law in August 2022, with $80 billion allocated over a decade to the IRS for reforms and enhanced tax enforcement. The CBO believes IRS revenue can be boosted by $124 billion over the next decade with the help of additional employees and new technology. The new Strategic Operating Plan follows the agency’s work to deploy those resources over the short and long term.
In its high-level roadmap for implementing the Strategic Operating Plan, a first wave of specialists will be hired in the FY 2023 to FY 2024 tax year to work on increasing HNW compliance. Audit rates have been tumbling at the IRS—individuals earning more than $10 million per year were audited at a rate of 2% in 2019.
New IRS Commissioner Daniel Werfel told reporters average taxpayers have nothing to fear from the reforms.
“We have years ahead of us where we will be 100% focused on building capacity for higher income individuals and corporations," Werfel said. "During this time, the audit rates of average taxpayers will not increase."