IRS To Radically Increase Certain Audit Types

Last Thursday, IRS Commissioner Werfel, outlined plans to bolster customer service and increase audits on specific target groups. Since the GOP led House gave his budget a major haircut for this year and next, the Service has been waging a public relations campaign trying to get as much of that money back as possible.

Part of what they’re trying is to deal with their customer service issues. Of course, every new IRS Commissioner comes into office saying that they’ll be the one commissioner out of the past dozen or so who will actually accomplish this task.

I don’t think that any of us would actually know what to do with ourselves if we received timely responses to our IRS Letters and had our calls picked up on the second ring. I’m sure it will happen about the time that pigs learn to fly.

The other part of the communication deals with a radical increase in audits of certain targeted groups. Those include…

1 – Large Corporations With More than $250M In Assets

Audit rates are supposed to rise to 22.6% in 2026 from 8.8% in 2019.

2 – Partnerships With Assets Of More Than $10M

These audits rates will purportedly rise 10-fold from .1% in 2019 to a full 1% in 2026.

3 – Individuals With Income In Excess Of $10M Annually

These audit rates will supposedly rise 50% from 11% in 2019 to 16.5% in 2026.

Let me leave you with this.

I’m sure this will come as no great surprise to any, given my usual dubious manner and snarky tone, that I’d be surprised if this actually came to fruition. These aren’t easy audit targets.

It takes an enormous amount of education and experience to examine these types of returns. The auditors would need to be very good in order to take on these types of examinations. People like me who do these returns actually know what they’re doing.

That being said, if the Service can pull it off, it would be a smart move. They’d actually be auditing the people and companies who can pay an IRS bill.

Many of the IRS Actions taken in the past ten years have been nothing more that, “a tale told by an idiot, full of sound and fury, signifying nothing.”

They audit tens of thousands of returns completed by the poorest of taxpayers given their problems with the Earned Income Tax Credit. And they should, given how many of those taxpayers aren’t properly reporting the income they receive from cash jobs and 1099’s.

But how much of those liabilities once established will ever be paid? I don’t know what the collection rate actually is, but it a poor family has to choose between putting food on the table and paying the IRS, I wonder which bill will get paid first.

Someone at the Service capable of cognition actually thought this one through.

And let’s not act like the companies and individuals they’re targeting don’t have issues. They have exactly the same issues that we see in smaller enterprises, only they’re larger and more complex.

We handle a lot of these cases and see everything from bank statements that don’t reconcile to payroll tax deposits not being made timely. Many of the accountants who work on these larger cases don’t take the time to make sure that everything is correct before the returns go out.

And many of the owners of those entities either don’t have the patience or want to pay for the time necessary to get those returns exactly right.

As such, if the Service is able to put the teams together that would be able to audit these returns, it would be a bonanza for the Federal Government. We’ll see what happens.

Probably just more, “sound and fury.”

We’re all going to get through this. Let’s get through it together.

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