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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.

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South Texas tax consultant

The usual tax season will be wrapping up soon, but that does not mean that the IRS will not be bothering you. Depending on how your returns look now—and even in prior years—you might find yourself dealing with an IRS tax audit anytime this year. Especially these days with so many people preparing their taxes on their own through apps and other software services, it can be easy to think that you might have made some mistakes on your returns that could call attention to them, raising numerous red flags in the eyes of IRS agents. Here is what you need to know about these audits and how you can avoid them.

What to Know About Tax Audits and How to Avoid Them

When the IRS audits your taxes, they are reviewing your tax returns and financial records to verify their accuracy. They want to check to see if you somehow did not pay the full amount of taxes due to them or if you failed to provide all the necessary and honest information to give them an accurate return. Some important facts to know about the auditing process include:

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