IRS to Increase Number of Audits, Focus on Wealthy Taxpayers and Large Businesses

by | May 3, 2024 | Audit, Internal Revenue Service

On May 2, 2024, the IRS released its Strategic Operating Plan, setting forth its priorities and future goals. The plan focuses on five key objectives:

  • Objective 1. Dramatically improve services to help taxpayers meet their obligations and receive the tax incentives for which they are eligible.
  • Objective 2. Quickly resolve taxpayer issues when they arise.
  • Objective 3. Focus expanded enforcement on taxpayers with complex tax filings and high-dollar noncompliance to address the tax gap.
  • Objective 4. Deliver cutting-edge technology, data and analytics to operate more effectively.
  • Objective 5. Attract, retain and empower a highly skilled, diverse workforce and develop a culture that is better equipped to deliver results for taxpayers.

Objective 3 deals with increased enforcement efforts. IRS Commissioner Werfel noted that the IRS’ strategic plan over the next three tax years include a sharp increase in audits, although he reiterated it won’t boost its enforcement for people who earn less than $400,000 annually. The report also notes that the IRS anticipates increasing audits on the wealthiest taxpayers, large corporations and large, complex partnerships by sizable percentages for tax year 2026:

  • The plan highlights the IRS will nearly triple audit rates on large corporations with assets over $250 million to 22.6% in tax year 2026, up from 8.8% in tax year 2019.
  • The IRS will increase audit rates by nearly ten-fold on large, complex partnerships with assets over $10 million, going from 0.1% in 2019 to 1% in tax year 2026.
  • The IRS will increase audit rates by more than 50% on wealthy individual taxpayers with total positive income over $10 million, with audit rates going from an 11% coverage rate in 2019 to 16.5% in tax year 2026.
  • At the same time, the IRS continues to emphasize the agency will not increase audit rates for small businesses and taxpayers making under $400,000, and those rates remain at historically low levels.

Handling an IRS audit can be a daunting and difficult process. Former IRS attorneys at Holtz, Slavett & Drabkin, APLC, have a lot of experience dealing with the IRS on most sensitive issues. You can reach us at (310) 550-6200 for a consultation.