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Watch CBS News

MoneyWatch


IRS SAYS ITS NUMBER OF AUDITS IS ABOUT TO SURGE. HERE'S WHO THE AGENCY IS
TARGETING.

By Aimee Picchi

Edited By Anne Marie Lee

Updated on: May 3, 2024 / 10:54 AM EDT / CBS News

 * 
 * 
 * 

How the IRS is using artificial intelligence to make sure people aren't playing
the system

How the IRS is using artificial intelligence to make sure people aren't playing
the system 02:08

The IRS says it is about to ramp up audits as it cracks down on tax cheats and
seeks to deliver more revenue into the U.S. Treasury's coffers. But not every
group of taxpayers will face more scrutiny, according to IRS commissioner Danny
Werfel. 

The IRS has been bolstered by $80 billion in new funding directed by the
Inflation Reduction Act (IRA), which was signed into law in 2022 by President
Joe Biden. The idea behind the new funding was to help revive an agency whose
ranks have been depleted over the years, leading to customer service snarls,
processing delays and a falloff in audit rates.

On Thursday, the IRS outlined its plans for the funding, as well as its efforts
so far to burnish the agency's customer service operations after some taxpayers
encountered months-long delays during the pandemic. The IRA money has helped the
IRS answer more taxpayer calls during the tax season that just ended on April
15, as well as beef up its enforcement, which led to the collection of $520
million from wealthy taxpayers who hadn't filed their taxes or still owed money,
it said.



"The changes outlined in this report are a stark contrast to the years of
underfunding" that led to a deterioration in the agency's services, Werfel said
on a conference call with reporters. 

Werfel noted that the IRS' strategic plan over the next three tax years include
a sharp increase in audits, although the agency reiterated it won't boost its
enforcement for people who earn less than $400,000 annually — which covers the
bulk of U.S. taxpayers. 




HERE'S WHO WILL FACE AN INCREASE IN AUDITS

At the same time, the IRS is increasing its audit efforts, with Werfel noting on
Thursday that the agency will focus on wealthy individuals and large
corporations:

 * The IRS plans to triple the audit rates on large corporations with assets of
   more than $250 million. Audit rates for these companies will rise to 22.6% in
   tax year 2026 from  8.8% in 2019.
 * Large partnerships with assets of more than $10 million will see their audit
   rates increase 10-fold, rising to 1% in tax year 2026 from 0.1% in 2019.
 * Wealthy individuals with total positive income of more than $10 million will
   see their audit rates rise 50% to 16.5% from 11% in 2019.

"There is no new wave of audits coming from middle- and low-income
[individuals], coming from mom and pops. That's not in our plans," Werfel said. 

But by focusing on big corporations, complicated partnerships and wealthy people
who earn over $10 million year, the IRS wants to send a signal, he noted.

"It sets an important tone and message for complex filers, high-wealth filers,
that this is our focus area," he said.




THE MYTH OF 87,000 ARMED IRS AGENTS

The agency also outlined its efforts to bolster hiring, thanks to the new IRA
money. In the mid-1990s, the IRS employed more than 100,000 people, but its
workforce had dwindled to about 73,000 workers in 2019 due to a wave of
retirements and prior funding cuts. 

Werfel said the agency has recently boosted its workforce to about 90,000
full-time equivalent employees, and that it plans to expand to about 102,500
workers over the next few years. 

"That number won't even be a record high for the IRS workforce; it's well below
the numbers from the 1980s and early 1990s," Werfel noted.

He added that the hiring data should dissolve what he called "any lingering
myths about a supersized IRS." After the IRA passed, some Republican lawmakers
warned in 2022 that the agency would use the money to hire "87,000 new IRS
agents to audit Walmart shoppers."

"This should put to rest any misconception about us bringing on 87,000 agents,"
Werfel noted, adding that many of the new hires are replacing retiring
employees. 


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   In:
 * IRS
 * Taxes

Aimee Picchi

Aimee Picchi is the associate managing editor for CBS MoneyWatch, where she
covers business and personal finance. She previously worked at Bloomberg News
and has written for national news outlets including USA Today and Consumer
Reports.

Twitter

First published on May 2, 2024 / 1:21 PM EDT

© 2024 CBS Interactive Inc. All Rights Reserved.


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