With the IRS Hiring More Agents, Will Your Risk of Being Audited Go Up?
- The IRS has received funding to hire 87,000 new agents.
- This will mean more auditors available to check whether Americans are paying enough taxes.
- Some people are a more likely target for audits than others.
An IRS audit isn't fun, so there's good reason to ask this question.
The Inflation Reduction Act that was recently signed into law by President Joe Biden provided money for more IRS enforcement. An estimated 87,000 new IRS agents are expected to be hired, which means there will be many more people to conduct audits.
Audits can be time consuming and stressful, and many people are worried they'll be audited and have to drain their bank account to deal with it. But are you really at an increased risk of becoming the subject of an IRS investigation? Here's what you need to know.
Is an increased audit risk something you need to worry about?
The Inflation Reduction Act undoubtedly appropriated billions of dollars to the IRS for new hires. However, this does not necessarily mean there will be tens of thousands of new auditors out there. One Treasury official indicated to Reuters that many of the new agents who are being hired will be replacing people who are retiring, or will be working in customer service to help answer questions or field telephone calls.
Still, when the Inflation Reduction Act allocated $80 billion in new funding to the IRS, this allocation was projected to generate as much $203.7 billion in revenue between 2022 to 2031 -- so, obviously, there is a plan for the IRS to engage in more enforcement efforts in order to collect additional taxes.
The big question, though, is who exactly is most likely to face increased scrutiny. And there are a few possible groups of people who could find themselves in this position.
Who is more likely to be audited after the new funding?
One group is individuals who claim the Earned Income Tax Credit. During a House Oversight Subcommittee hearing, the IRS chief taxpayer experience officer indicated returns on which the EITC is claimed have "historically had high rates of improper payments and therefore require greater enforcement." This credit is available mostly to lower-income individuals, so this is one group who could see their audit risk increase.
The goal of the funding in the Inflation Reduction Act was also to help ensure that wealthy individuals are paying their fair share of taxes and that self-employed workers are also paying the full amount they owe, since it can be harder to track their compliance compared with W-2 employees who simply receive a paycheck. So it is possible more high earners and small businesses will soon be audited.
Most people and companies, however, will not need to worry about this for a while. It will take time to hire and train new agents, so the number of audits is not likely to increase substantially until 2026 or 2027.
How to make doing taxes easier
Audits are scary for anyone, but if you comply with the tax rules and pay what's due, then you won't have to worry as much.
Fortunately, there are plenty of great tax software options out there that are easy to use and help you ensure you are claiming all legal deductions and credits while still complying with IRS requirements. Using a good tax software can be the ticket to reducing the chances of triggering an audit with a mistake -- and to ensuring that if you are audited, you'll come out unscathed.
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