IRS’s Tax Audits Slid After End Of Program To Focus On Wealthy

According to a watchdog report released Monday, the Internal Revenue Service has “completed fewer audits of wealthy taxpayers since ending a program to focus on top earners, leading to as much as $1.9 billion in tax dollars going uncollected.”

In 2017, the IRS stopped a program that focused on auditing individuals earning at least $200,000, leading to a 37% decrease in the number of audits on high-income taxpayers. The number of audits dropped to about 29,600 in fiscal year 2019 from more than 47,000 in fiscal year 2015.

The watchdog report, recommended “the IRS create a plan to identify taxpayers making at least $200,000 who may be underreporting their true income to avoid taxes.” However, IRS management disagreed with the recommendation and said that “the current audit processes sufficiently target high-earning taxpayers.” 

Congress is considering “a major injection into the agency’s enforcement arm” and the Senate is negotiating a bipartisan infrastructure deal includes “$40 billion for the IRS to boost audit efforts with the goal of raising $100 billion more in tax collections.”

High-income taxpayers underreporting their income on tax returns has been a popular target for lawmakers and IRS officials. 

Joining the fight is President Joe Biden, who has proposed giving the IRS as much as $80 billion for enforcement programs that the Treasury Department says “could collect as much as $700 billion over a decade.” 

See Laura Davison, IRS’s Tax Audits Slid After End Of Program To Focus On Wealthy, Financial Advisor, July 12, 2021. 

Special thanks to Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.