IRS Tax Problems

Are Increased Audits and IRS Enforcement on the Horizon?

Are Increased Audits and IRS Enforcement on the Horizon?

When President Joseph R. Biden was sworn into office, he came with a long list of proposals and priorities that would significantly alter many aspects of American life. Among them was a long-held belief that the Internal Revenue Service (IRS) needed more funding in order to effectively enforce U.S. tax laws. Over the last several decades the agency became a convenient way to trim the budget, and as its budget was cut so too was the staff needed to pursue tax cheats. The passage of the infrastructure bill and the potential passage of the Build Back Better bill have substantially improved the chances that the agency will indeed be strengthened.

Though opponents argue that the costs do not warrant the benefits, the Biden administration has asserted that the approximately $80 billion in additional funding will be funded through a 15% minimum corporate tax rate, as well as a one percent surcharge on stock buyback transactions and SALT tax cap changes. They say that this will allow the IRS to hire additional staff and that as a result, the agency would be better able to enforce the tax code and boost the number of audits that are being conducted. 

It has been easy for previous administrations to use the IRS as a virtual piggy bank, choosing to cut its funding in order to meet budgetary goals. The effect has been that the agency is now so understaffed that its efforts at enforcement are severely handicapped, and have been for several years. According to the Treasury Department, roughly $600 billion dollars in taxes owed to the government are left uncollected by tax cheats, and a significant portion of those who are not paying the taxes that they owe are the wealthiest among us. The agency estimates that 25% of uncollected tax revenue is owed by the nation’s top one percent. 

When this amount of uncollected revenue is combined with untold penalties and interest owed, it’s easy to see why proponents believe that the $80 billion investment in the agency is worth it. The Office of Budget Management has crunched the numbers and predicted that if enforcement efforts were increased as much as the administration would like, it will take in about $200 billion over a ten-year period, and a good portion of the increased revenues would help to bring on even more personnel and government funding. Between improved collections and boosting the amount of taxes that corporations and wealthy individuals pay, the administration hopes to both improve IRS operations and to fund other agenda items that will build infrastructure and strengthen the social safety net.

Though the Build Back Better bill has not yet passed and its future remains unclear, increased audits and enforcement are definitely a possibility. Now is the time for wealthy individuals and corporate management to review their tax plans and filings in order to ensure that they are in compliance.  

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Steward Financial

Steward Financial

Jon Osborn is a tax preparer based in San Dimas, California. His company, Steward Financial Services, offers a broad range of tax preparation, accounting and business consulting for small businesses. He loves to work with clients who are looking for answers to complex tax and business planning issues. He has owned several small businesses and worked with over one hundred small business owners. He helps his individual and business tax clients find the best ways to spend their money in order to minimize IRS tax. Small businesses looking to grow, sell or just increase cash flow are one of Jon's specialties.

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