IRS says audits for rich people and corporations are about to hit a whole new level. Buckle up.
IRS says audits for rich people and corporations are about to hit a whole new level. Buckle up.
The Internal Revenue Service is getting specific about how many more audits it wants to spring on rich taxpayers and businesses, as the tax collector absorbs billions of dollars in funding in order to toughen tax compliance at the top.
By the time people file their 2026 taxes, the IRS wants a 50% jump in the audit rate for households with incomes of $10 million and up, the agency said in a report Thursday. It’s also seeking to nearly triple the rate of corporate audits.
Though the latest finalized audit numbers were already starting to show slight increases in audit rates for wealthy households, the newly announced goals would be a sharp move higher.
Still, the agency said, it’s an increase that would bring “coverage rates” — meaning the share of taxpayers being audited — back around their levels from more than a decade ago, before underfunding and waning staff counts.
There are no plans to bump up audits on households making less than $400,000, IRS Commissioner Danny Werfel told reporters. “Those remain at historically low levels,” he said.
In the midst of a congressional fight over the Inflation Reduction Act funding, the Treasury Department issued a 2022 directive telling the IRS not to increase audit rates under that $400,000 threshold.
Instead, the focus is supposed to be on the top of the income distribution — and that’s where the IRS says it’s looking.
The agency said Thursday it wants to be auditing 16.5% of the 2026 returns for households with total positive income of at least $10 million. The finalized numbers for 2019 returns show the IRS audited 11% of returns within this rarefied income band, and recommended those households collectively pay almost $144 million in extra taxes.
Also for tax year 2026, more than 22% of income-tax returns from corporations with at least $250 million in assets would undergo audits, according to the IRS’s plans. In contrast, the coverage rate was less than 9% on the 2019 returns.
The goals are part of the ongoing IRS effort to show what it’s doing to maximize the billions of dollars provided by the Inflation Reduction Act. The 2022 law passed in a Democrat-controlled Congress.
The Inflation Reduction Act earmarked $80 billion for the IRS over a decade, though congressional Republicans carved that sum back to approximately $60 billion after the law’s enactment.
The IRS is also highlighting its efforts as it makes the case for stable funding levels in the long term, including through funding proposed in President Joe Biden’s 2025 budget.
Back in 2022, the legislative fight over the $80 billion in supplemental IRS funding included allegations by the GOP that the agency would mushroom its ranks.
“This report should lay to rest any lingering myth about a supersized IRS,” Werfel said. The IRS now has approximately 90,000 full-time employees, up from around 79,000 employees in fiscal year 2022, he noted.
The end goal would be a headcount of around 102,500 at the end of this decade, Werfel said. “We believe that figure represents a right-sized IRS,” he said.
The IRS had around 8,400 revenue agents when lawmakers passed the Inflation Reduction Act. The headcount has increased, and does not include people with job offers who have yet to formally join, Werfel said.
Audits are one part of tax enforcement. The IRS said it has already collected more than half a billion dollars from wealthy households with unpaid tax debts or unfiled tax returns.
The IRS recently sent out more than 125,000 notices about unfiled tax returns to households making at least $400,000.
It’s too soon to say what the early results are, Werfel said Thursday. “We know our phone started ringing with questions,” he said.
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