The IRS May Get a Big Budget Increase. Will It Impact the Rate of Audits?

The IRS May Get a Big Budget Increase. Will It Impact the Rate of Audits?

  • Find out how much the IRS budget will increase.
  • Learn more about the current situation at the IRS.
  • Discover what politicians have to say about the potential increase in audits.
  • Read what the U.S. Treasury has to say about the rate of audits.

In September of 2021, the Congressional Budget Office announced a proposal to increase funding for the IRS. The budget will increase by as much as $80 billion over the next ten years. The argument is that doing so would ultimately increase the revenue the organization is able to generate by as much as $200 billion over the next decade. But what does that mean for audits?

A significant portion of the new money — to the tune of about $60 billion — is aimed at empowering enforcement actions. All told, that means by 2031, the IRS will double the number of people working for it. It will also have a 90% higher budget than they do right now.

This, of course, has led people to wonder about some things. Namely, does this increase mean that more people than ever are about to get audited?

Obviously, the situation is more nuanced than people on both sides of the aisle are giving it credit for. Therefore, understanding what this means and what implications it may have requires you to keep some things in mind. Fiducial has more information below.

The current situation with the IRS: What you need to know

While it's difficult to say exactly what the future might hold, some Republicans believe that the plan would indeed increase the rate at which people are audited. House Minority Leader Kevin McCarthy, for example, cited research saying that the funding would lead to an increase of 1.2 million additional audits each year compared to those taking place right now. More than that, he claimed that roughly 50% of them would target homes making under $75,000 per year.

Others are not quite as pessimistic about the situation. According to a report filed in September from the CBO, it's estimated that the new funding won't necessarily lead to a "major increase" in audits in the strictest sense of the term. It's just that the IRS has been understaffed and underfunded for so long that they haven't been able to operate at their "normal" level of activity.

Therefore, the increase in the budget — and the new employees that it will bring with it — will simply allow the number of audits to rise to where they were roughly 10 years ago. It's an increase over recent memory, yes — but historically, that isn't necessarily the case.

Will the number of IRS audits increase?

What the future holds for audits

Despite all this, the United States Treasury has stated several times that its goal is for the rate of audits to not increase for households that make under $400,000 per year. Again, it's difficult to know exactly what the future will bring. This is one situation that many will be paying attention to moving forward.

Want more information about whether the IRS's new budget increase will impact the audit rate? Would you like to discuss your own needs with someone in a bit more detail? Call Fiducial at 1-866-FIDUCIAL or make an appointment at one of our office locations to discuss your situation.

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