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The IRS is working to spice up its audit rates for the wealthiest Americans, in keeping with a press release recently released with the agency’s annual Data Book, covering activities for the 2021 fiscal 12 months.
While plummeting audits have drawn scrutiny from Congress, percentages have doubled for filers making over $100,000 to greater than $10 million over the past seven months, in keeping with the statement.
What’s more, audits of higher-income taxpayers often come later within the statutory period — inside three years of a filing — meaning audits for 2019 should still occur through no less than 2023, the agency says.
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Still, the IRS says “resource constraints” have limited the agency’s ability to audit high net price individuals, large corporations and sophisticated business structures, and reviews have significantly declined for the reason that 2010 tax 12 months.
“Audit rates for taxpayers with incomes of greater than $200,000 decreased probably the most, largely because higher-income audits are likely to be more complicated and require auditors to manually review multiple issues,” Ken Corbin, chief taxpayer experience officer for the agency, told the House Oversight Subcommittee in May.
Currently, the agency still has only 6,500 agents to tackle audits for high-income filers, in keeping with the May IRS statement.
Although the IRS in March said it planned to rent 10,000 employees to deal with the agency’s backlog, Corbin admitted hiring has been a challenge. The agency on Wednesday issued one other call to rent 4,000 representatives.
IRS audits declined by 44% between fiscal years 2015 and 2019, in keeping with a 2021 report from the Treasury Inspector General for Tax Administration. Audits dropped by 75% for filers making $1 million or more, and 33% for low-to-moderate earners claiming the earned income tax credit, often called EITC.
Returns claiming the EITC have “historically had high rates of improper payments and due to this fact require greater enforcement,” Corbin said through the May House Oversight Subcommittee hearing.
Since many lower-income filers are wage earners, audits are generally less complex and will involve an automatic process.
Americans making greater than $5 million annually had just over a 2% likelihood of being audited in 2019 compared with greater than 16% in 2010, in keeping with a May report from the Government Accountability Office, a federal watchdog.
The report cites budget cuts as the first reason for the decline, dropping to $11.9 billion for fiscal 2021, which is $200 million lower than 2010, together with limited staffing.