IRS Announces Plan to Increase Audit Coverage of Large Corporations, Complex Partnerships, and Wealthy Taxpayers
By Anthony P. Daddino on May 3, 2024
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Anthony P. Daddino
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Yesterday the IRS announced updates to its strategic operating plan, which details how the IRS is spending billions of dollars from the Inflation Reduction Act (IRA). Spoiler alert – read the title of this Blog post.
The IRS has announced plans to increase the audit rate for corporations with assets over $250 million to 22.6 percent in tax year 2026, up from 8.8 percent in tax year 2019. The IRS also plans to raise audit rates on individuals earning more than $10 million from 11 percent to 16.5 percent in tax year 2026. Lastly, IRS announced it will increase audit rates on large, complex partnerships to 1 percent, up from 0.1 percent.
How does the IRS plan to accomplish these ambitious audit goals? Sheer manpower. By fiscal 2029, the IRS hopes to have 102,500 full-time equivalent employees — up from 82,990 in fiscal 2023.
Of course not all of the IRA funds are being used for IRS enforcement. The IRS’ updated report outlined several measures designed to improve online taxpayer services and the agency’s overall technology capabilities. While short on details, the IRS also noted its efforts to use artificial intelligence, stating that it is using AI presently to select complex partnerships for examination.
The IRS has announced plans to increase the audit rate for corporations with assets over $250 million to 22.6 percent in tax year 2026, up from 8.8 percent in tax year 2019. The IRS also plans to raise audit rates on individuals earning more than $10 million from 11 percent to 16.5 percent in tax year 2026. Lastly, IRS announced it will increase audit rates on large, complex partnerships to 1 percent, up from 0.1 percent.
How does the IRS plan to accomplish these ambitious audit goals? Sheer manpower. By fiscal 2029, the IRS hopes to have 102,500 full-time equivalent employees — up from 82,990 in fiscal 2023.
Of course not all of the IRA funds are being used for IRS enforcement. The IRS’ updated report outlined several measures designed to improve online taxpayer services and the agency’s overall technology capabilities. While short on details, the IRS also noted its efforts to use artificial intelligence, stating that it is using AI presently to select complex partnerships for examination.
For more information on the IRS’ updated strategic plan, click HERE.
So what does this mean for large and wealthy taxpayers? Even for those with sophisticated in-house tax professionals, such taxpayers would be well advised to engage outside counsel at the outset of any audit. And for those who learn of issues, or areas of potential IRS disagreement, in prior-year returns, such taxpayers should promptly seek counsel to discuss options for mitigating risk or otherwise preparing for IRS challenges. For as the old saying goes, the tax man cometh.
If you have any questions about this Blog post or any other Treasury, IRS or tax-related matter, feel free to contact me directly at (214) 749-2464 or adaddino@meadowscollier.com.
