According to an IRS statement, the agency is working to increase audit rates for the country’s wealthiest citizens.
While the number of audits has decreased, the IRS noted that the number of audits for higher earnings has doubled in the last seven months.
Despite this, the agency’s ability to examine high-net-worth people, large organisations, and complicated corporate structures have been hampered due to “resource restrictions.”
According to a statement recently released with the IRS’s annual Data Book, which covers actions for the fiscal year 2021, the IRS is working to increase audit rates for the wealthiest Americans.
While declining audits have drawn congressional concern, the percentage of filers earning more than $100,000 has risen in the last seven months, according to the statement, to more than $10 million.
Furthermore, because audits of higher-income taxpayers typically occur later in the statutory period – within three years of a filing — audits for 2019 might continue until at least 2023, according to the IRS.
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Despite this, the IRS claims that “resource restrictions” have hampered the agency’s capacity to audit high-net-worth people, huge organisations, and complicated business structures, and that audits have decreased dramatically since the 2010 tax year.
In May, Ken Corbin, the agency’s chief taxpayer experience officer, told the House Oversight Subcommittee that “audit rates for taxpayers with incomes of more than $200,000 decreased the most, largely because higher-income audits tend to be more complicated and require auditors to manually review multiple issues.”
According to a May IRS statement, the IRS still only has 6,500 agents to deal with audits of high-income filers.
Despite the IRS’s announcement in March that it will hire 10,000 people to help with the backlog, Corbin confessed that hiring has been difficult. On Wednesday, the agency put out a new job posting for 4,000 agents.
According to a report published in 2021 by the Treasury Inspector General for Tax Administration, IRS audits dropped by 44% between fiscal years 2015 and 2019. Audits fell by 75% for filers earning $1 million or more, and by 33% for low-to-moderate incomes claiming the EITC.
During a hearing in May before the House Oversight Subcommittee, Corbin stated that returns claiming the EITC have “historically had high percentages of illegal payments and hence demand increased enforcement.”
Audits are often less complex and may entail an automated procedure for lower-income filers because many of them work.
According to a May report from the Government Accountability Office, Americans earning more than $5 million per year had little over a 2% chance of being audited in 2019, compared to more than 16% in 2010.
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Budget cuts, which have dropped to $11.9 billion for fiscal 2021, a $200 million decrease from 2010, as well as insufficient staffing, are cited as the key reasons for the dip, according to the research.
