By now, you’ve heard that through the Inflation Reduction Act of 2022, the IRS has been allocated $80 billion over the next 10 years to staff up and improve on systems in an effort to increase tax compliance and collect an estimated $203 billion in revenue. This has led many to contact Bryson Law Firm, LLC to address their tax problems for fear of IRS collections and audits. Here is what you need to know and what you should do in preparation:
87,000 IRS AGENTS
More than half of the allocated IRS budget is set apart for enforcement actions, which will call for more IRS agents in the coming years. It is estimated that 87,000 agents will need to be hired to maintain IRS efficiency. With increased enforcement will come an increased number of IRS audits and collections on unpaid balances. Because the IRS has a $600 billion tax gap to close in on, the IRS states that they plan to focus their audit efforts on high earners (household income of $400,000 or more), large corporations, and other complex business entities. Some senate members believe that a significant portion will still be raised from taxpayers with income below $400,000. A recent senate analysis indicated that taxpayers making less than $25,000/year were audited 5x more than other taxpayers in 2021, so while those audit numbers may not increase, the possibility of an audit is still there.
NEW IRS TECHNOLOGY, SYSTEMS, AND TAXPAYER SERVICES
Funds were also allocated toward updating the IRS’ technology and business systems and taxpayer services. The IRS has plans to integrate more sophisticated data analytics and artificial intelligence tools – systems that can run algorithms to help the IRS agents identify anomalies in data patterns, which is set to help the IRS find underreporting tax issues.
ARMED IRS STAFF
The IRS Criminal Investigation Division does employ special agents who are authorized to carry firearms in certain situations, as thousands of agents work cases where arrests are warranted. The IRS does not arm their typical enforcement agents.
The IRS does plan to use a portion of the appropriation for compliance enforcement in the area of virtual currency/cryptocurrency.
WHAT TO DO IF YOU ARE A NON-COMPLIANT TAXPAYER
If you owe back taxes, now is the time to begin the resolution process. The plan of “waiting for the IRS to catch up from COVID and contact me” needs to be updated with a more proactive case plan. If you are behind on your tax return filings or are aware of an issue with your tax return filings, now is the time to get current and compliant with filing all tax returns and ensure that your returns are accurately prepared with complete information. Although all the details as to how these allocated billions will be spent is still unclear, there is no doubt about one thing – this will be a revitalized IRS. If you’re facing a tax problem, contact a tax professional today! Bryson Law Firm, LLC is here to help.