The IRS is Boosting the Audit Rate of Wealthy Filers

The IRS is Boosting the Audit Rate of Wealthy Filers

A statement recently released by the IRS indicates that the agency is keen on boosting the audit rates for the wealthiest Americans.

In conjunction with the release of its annual Data Book for 2021, which includes a wealth of statistics on examination rates, the IRS response to the COVID-19 pandemic, the provision of advance Child Tax Credits and Economic Impact Payments, as well as the usual information on the number of returns processed, revenue collected, and tax refunds issued, the IRS issued a separate statement providing an update on its latest audit numbers, pointing to how it is incentivized to audit.

While audits have declined — drawing investigation from Congress — percentages for filers earning more than $100,000 to more than $10 million quadrupled in the last seven months, according to the statement.

Furthermore, audits of higher-income taxpayers frequently occur later in the statutory timeframe – within three years of a filing — implying that audits for 2019 may potentially occur until at least 2023, according to the agency.

Nonetheless, the IRS claims that "resource restrictions" have reduced the agency's capacity to audit high-net-worth people, huge organizations, and sophisticated business structures, and that audits have decreased dramatically since the 2010 tax year.

According to a 2021 report from the Treasury Inspector General for Tax Administration, IRS audits decreased by 44% between fiscal years 2015 and 2019. Audits were reduced by 75% for taxpayers earning $1 million or more, and 33% for low-to-moderate incomes claiming the earned income tax credit (EITC).

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