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Increases to the IRS’s Budget May Lead to More Tax Audits

Posted on in Tax Services

Corpus Christi IRS audit representationRecently, President Joe Biden unveiled a proposal for an increased budget for the Internal Revenue Service (IRS). This proposal would increase the agency’s funding by $80 billion over the next 10 years, allowing the IRS to conduct more tax audits and focus on collecting taxes owed by high-income individuals and businesses.

President Biden and the IRS are looking to reduce the “tax gap,” or the difference between what taxpayers owe and what is actually collected by the IRS. The IRS’s commissioner recently stated that the tax gap is close to $1 trillion per year. This gap is due in part to a reduction in the audits performed by the IRS over the past decade. Since 2012, the number of millionaires in the United States has doubled, but audits of these taxpayers have decreased by 72%. The IRS has also reported that the top 1% of income earners fail to report 20% of their income, resulting in an annual loss of $175 billion in tax revenues.

Who Will Be Impacted by Tax Audits?

If Congress approves Biden’s proposal and increases the IRS’s budget, the agency will have more resources to focus on collecting taxes owed by wealthy individuals and high-earning businesses. Technological improvements will provide the IRS with better access to financial information, allowing it to identify offenders who use complex schemes to avoid paying taxes.

The IRS’s increased efforts will target individual taxpayers who earn more than $400,000 per year. While it will also focus on large companies, tax advocates believe that some types of small businesses may fall under increased scrutiny. Businesses that focus on cash transactions, such as restaurants, salons, or retail stores, may be targeted for audits, and they could be subject to penalties for failing to properly report income or pay delinquent taxes that are owed.

Businesses that may be subject to audits will want to make sure they are following all record-keeping requirements. By following the correct business accounting procedures, a business can make sure its books are in order, and during an audit, it can demonstrate that it has complied with the tax laws.

Contact Us for IRS Audit Help in San Antonio

If you are facing an audit by the IRS, or if you want to make sure your business has met all requirements for keeping records, reporting income, and claiming tax deductions and credits, Ed Villanueva & Associates, Inc. can provide the assistance you need. We can advise you on the best ways to address tax-related issues while taking steps to minimize the taxes or penalties you may owe to the IRS. Contact our South Texas business tax consultants and schedule a free consultation by calling 210-382-9015.

Sources:

https://www.cnbc.com/2021/05/05/bidens-80-billion-plan-to-beef-up-irs-audits-may-target-wealthy-small-business-owners.html

https://federalnewsnetwork.com/agency-oversight/2021/04/biden-pushes-bigger-budget-for-irs-to-collect-700b-in-taxes-already-owed/

https://www.businessinsider.com/biden-wants-more-irs-funding-to-audit-wealthy-and-corporations-2021-4

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