If Congress passes its proposed infrastructure plan as it stands now, the new law would include $40 billion to expand IRS audits on the wealthy and small businesses.
The IRS isn’t waiting to start hiring. It’s hoping to bring in replacements for the nearly 17,000 audit staff that have been eliminated during the past decade.
The small business unit is adding about 2,000 new workers, including 1,300 revenue agents, before the end of the IRS’s fiscal year in September. The criminal investigations division is adding about 500 people this year – about half of them special agents.
This is practically a hiring bonanza for the IRS. In recent years, the small business team has added only a couple hundred agents over the past few years, according to the division’s co-commissioner. The criminal investigations division has only added about 330 people in the five-year period ending in FY 2019. The agency has struggled to replace auditors as they retire or leave the agency.
These new agents and auditors would allow the IRS to substantially expand its auditing and investigations capacity quickly should Congress pass the infrastructure plan. The bipartisan bill is expected to generate $100 billion in new tax revenues through increasing enforcement.
Large tax gap has many infuriated
As we have discussed recently, the nonprofit newsroom ProPublica obtained secret, detailed tax records for many of America’s top earners. The group learned that the top 25 richest Americans paid about 3.4% in taxes on the gains in their wealth between 2014 and 2018.
Moreover, earlier this year IRS Commissioner Chuck Rettig told a Senate committee that the U.S. isn’t collecting nearly the total in taxes owed. The gap between what is actually owed and what was paid could be $1 trillion this year alone.
Part of the reason for that gap may be reduced enforcement, particularly in regard to corporations and high-earning individual taxpayers. This was due to decreased staffing and budgets, which made it easier and cheaper to audit the poor than the wealthy and corporations.
The infrastructure plan could substantially increase IRS enforcement. Congress is also considering an IRS budget for next year of $13.6 billion – an increase of $1.7 billion over 2021 levels.
Brace yourself for increased auditing and enforcement
These increases to the IRS’s budget are not certain, but they are apparently certain enough for the agency to act on. If you believe you may have underpaid your taxes, you can’t rely on lack of enforcement to protect you. Talk to a tax attorney right away.