Significant increase in audit rates for big corporations, partnerships, and millionaires targeted by US IRS

By Better Today On May 2, 2024

TL/DR –

The Internal Revenue Service (IRS) has plans to significantly increase audit rates for large corporations, partnerships, and multi-millionaires over the next three years to boost collections. The IRS will target large corporations with assets over $250 million and complex partnerships with assets over $10 million, while also increasing audit rates by 50% for individuals with an annual income over $10 million. Importantly, the IRS emphasized that it will not increase audit rates for individuals and small businesses earning under $400,000, aligning with President Joe Biden’s pledge not to increase taxes for this population.

IRS Plans to Increase Audit Rates for Big Corporations and Multimillionaires

The Internal Revenue Service (IRS) announced its intention to significantly increase audit rates for large corporations, partnerships, and multimillionaires within the next three years. This move is part of the IRS’s enforcement spending and hiring strategy to enhance collections.

The IRS is strategically planning to allocate funding from the 2022 Inflation Reduction Act to effectively triple audits on corporations with more than $250 million in assets by 2026. Complex partnerships with assets over $10 million will also see a nearly 10-fold increase in audit rates. Individuals with an annual income exceeding $10 million are also on the agency’s radar for a 50% increase in audit rates.

Notably, the IRS has emphasized that audit rates for individuals and small businesses with earnings under $400,000 will not see an increase, in line with President Joe Biden’s tax policy commitments. The IRS is set to increase its spending of the Inflation Reduction Act funds to $7.25 billion in fiscal 2024, a significant rise from $3.4 billion in fiscal 2023.

The IRS aims to spend a total of $57.82 billion through fiscal 2031. The agency’s strategy to boost funding is a marked shift from years of underfunding that impacted both taxpayer service and tax enforcement. The Inflation Reduction Act funding, originally approved at $80 billion over a decade, is designed to modernize the IRS’s outdated computer systems, enhance taxpayer services, and intensify enforcement to close the “tax gap”.

However, Republicans have opposed the IRS’s spending and successfully reduced the funding by $20 billion this year. Despite this, the IRS hired 13,661 people in fiscal 2023 using funds from the Inflation Reduction Act. The agency plans to increase these hires to 16,314 in fiscal 2024, contributing to a total projected IRS workforce of approximately 93,000 by 2028.