The IRS got a whole bunch of money from the so called “Inflation Reduction Act,” to target "the wealthy," but a recent audit by the Treasury Inspector General for Tax Administration (TIGTA) found that IRS audits still unfairly targeted the middle class despite assurances from the IRS that they wouldn’t.
Introduction:
Despite the infusion of billions of dollars and grand plans to focus on high-income earners, the IRS still appears obsessed with auditing the middle class. Add in sluggish hiring and vague strategic plans, and the early findings looking into how the IRS has used its newfound windfall are not good.
This Is Important:
The IRS's failure to pivot its audit priorities has implications for middle-class individuals and businesses that are bearing the brunt of the IRS's recent increase in audits, despite assurance that the wealthy were the target of their plan to perform increased audits.
It’s more important than ever for taxpayers as well as accountants to understand the risks involved so they can prepare to defend themselves or accountants, their clients, against exposure to the new focus on audits.
Key Points:
The IRS made grand promises to focus this increase in audits on high-income earners and alleviate the pressure on the middle class. Funny enough (not "haha" funny), TIGTA's findings reveal that the IRS has no specifics on how to make good on those promises.
The IRS's April 2023 strategy is more talk than action, leaving us wondering if the agency's priorities will ever match what they say in public.
2. The Data Tells a Different Story
The IRS pledged to focus on those earning over $400,000, but the initial numbers say something different. As of last summer, 63% of new audits targeted those earning less than $200,000, while 80% involved individuals making less than $1 million.
Thus far, the middle class is still the primary target, while the ultra wealthy avoid the IRS’s new focus on audits.
Recommended by LinkedIn
3. Hiring Woes: Empty Desks, Empty Promises
The IRS's goal to hire 3,700 agents isn’t starting off so well. The agency hired just 34 agents in the first six months, failing miserably to meet its targets. Their staffing issues further underscore the agency's inability to shift its audit focus, leaving it to continue its tradition of going after middle-class taxpayers.
4. Implications for Taxpayers and Businesses
With the IRS's hiring shortfalls and failure to refocus its audits, taxpayers and businesses remain vulnerable. The IRS continues to subject middle class taxpayers to misguided audits, subjecting them to unnecessary scrutiny and legal expenses.
TL;DR: Too Long; Didn’t Read
The IRS has thus far failed to follow through on its promises to focus on high-income taxpayers and leave the middle class alone. TIGTA's findings show that middle-class taxpayers are feeling the brunt of the increase in audits and the IRS is struggling with inadequate staffing. This means more scrutiny and headaches for individuals and businesses alike.
Call to Action:
Have you been audited recently? What was your experience?
Accountants: Have you seen an increase in audits generally?
If so, have your middle class clients been hit the hardest?
Share your experiences with the group and comment below!
Thank you for checking in with us and enjoying your weekly installment of Resolving Tax Debts!
I sincerely appreciate your support.
