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IRS announces more audits for certain groups of taxpayers

The IRS says audit rates for those making under $400,000 will not change.
Financial Wellness Tax Tips
Posted at 9:57 AM, May 03, 2024

The Internal Revenue Service announced that several groups of taxpayers will be more likely to face audits in the coming years.

The increased audits do not come as a surprise after Congress passed the Inflation Reduction Act, which provided the IRS with additional funding to replenish its staffing levels. Lawmakers had promised to increase tax enforcement on wealthy Americans to increase tax revenue.

The IRS said 22.6% of large corporations with assets over $250 million will face an audit in tax year 2026. As of 2019, 8.8% of these corporations were audited.

The IRS plans to increase audits of large, complex partnerships with assets over $10 million from 0.1% in 2019 to 1% in 2026.

Individuals with incomes of over $10 million will face a 16.5% chance of being audited in 2026, which is up from 11% in 2019.

IRS building with the words "Internal Revenue Service."

Money

IRS outlines intended targets for enhanced audits

Justin Boggs
11:22 AM, Sep 08, 2023

The agency said it would fulfill its pledge not to increase audit rates on those making less than $400,000.

The updates to audit rates come as the IRS issued its annual report showing how the agency plans to modernize its operation plan. The IRS said its top objective is to "dramatically improve services to help taxpayers meet their obligations and receive the tax incentives for which they are eligible."

"The changes outlined in this report are a stark contrast to the years of under-funding that deteriorated taxpayer service and tax enforcement, frustrating taxpayers, the tax community and IRS employees alike," IRS Commissioner Danny Werfel said. "The funding provided by the Inflation Reduction Act creates a unique opportunity to realize a future of tax administration that meets the evolving needs of taxpayers. This opportunity is important for the future of the IRS, the nation and especially the taxpayers we serve."

The Inflation Reduction Act, which provided $80 billion for the IRS to strengthen its staffing, was universally opposed by congressional Republicans.

Republicans have decried the legislation, especially the additional funding for the IRS. Many Republicans have accused the Biden administration of using the IRS to increase audits on middle-income taxpayers — a claim the Biden administration has pushed back on.