As part of its effort to crack down on tax evasion and cheats, the Internal Revenue Service plans to more than double the audit rates of wealthy Americans, increasing it to 16.5%, up 6.5% from 2019. It will also triple the rates for corporations with assets of more than $250 million, as well as boost the audit rates tenfold for business partnerships with assets more than 10 million. The IRS does not plan to increase audit rates for small businesses or individuals making less than $400,000, per an order from Treasury Secretary Janet Yellen, the agency said.
The Inflation Reduction Act, which President Biden signed into law in 2022, will fund this effort to deflate the estimated $600 billion tax gap and improve tax compliance for large corporates and wealthy individuals. The agency has earmarked $9.3 billion in 2025, $7.3 billion in 2026 and more than $57 billion in total through 2031 in spending on these measures.
IRS audits have often disproportionately affected low-income taxpayers because the complex investments of higher-income Americans can conceal the disparity between taxes owed and paid versus taxes reported and paid.
“As I’ve said over and over again, there is no new wave of audits coming for middle- and low-income [taxpayers], coming for mom-and-pops,” IRS Commissioner Danny Werfel said. “That is not in our plans in any way, shape or form.”
