$80 billion in new IRS Funding
The IRS has a backlog of
millions of unprocessed paper tax returns and taxpayers/tax professionals can’t
get through to the agency on the phone. Congress noticed and took action by
passing a massive funding of the IRS in the recently enacted Inflation Reduction
Act.
The IRS will get an
additional $80 billion over the next decade. This includes $35 billion for
taxpayer services, operations support, and business systems. Staffing increases are anticipated to be
between 20,000 – 30,000 workers over the next decade and the number of revenue
agents could increase to 17,000 by 2031— over twice as many as today.
The IRS will have an
additional $45 billion to spend on enforcement. Although Treasury Secretary Janet
Yellen has promised that IRS audit rates will remain at “historical levels” for
taxpayers earning less than $400,000 annually this remains to be seen.
My best recommendation is to
plan as though you will be audited. You should keep complete and
accurate records and file a timely tax return.
Here are a few special areas
of concern:
·
Cryptocurrency. You can expect increased IRS audits dealing with
cryptocurrency transactions. If you’re one of the millions of Americans who engage
in such transactions, make sure you keep good records and report any income you
earn.
·
S Corporations. If you’re an S corporation shareholder-employee, you should
have your S corporation pay you an arguably reasonable salary and benefits, and
document how you arrived at the amount.
·
Sole
Proprietorships. If you operate a
sole proprietorship and report over $100,000 in gross receipts you are seven
times more likely to be audited as compared to an S Corporation reporting
similar revenue based on historical data.
Are you taking the necessary
steps to avoid IRS attention? If you are
not sure, please contact me.