The IRS Targets $100 Billion Revenue Increase Over Next Decade
The Internal Revenue Service (IRS) has set an ambitious goal to boost its revenue by $100 billion in the coming ten years. This objective will be pursued primarily through intensified auditing efforts aimed at ensuring comprehensive income reporting by taxpayers. The agency’s focus, as emphasized by IRS Commissioner Danny Werfel, will primarily be on high-income individuals and large corporations, rather than average Americans, small businesses, or those receiving W-2s and Social Security benefits.
Understanding IRS Audits An IRS audit involves a detailed examination of an individual’s or business’s tax filings to verify the accuracy of reported income, deductions, and credits, ensuring compliance with tax laws. Audits can be triggered by various factors, including random selection, discrepancies in the tax return, or specific indicators that warrant further inspection.
Targeted Groups for Auditing The IRS plans to concentrate on auditing taxpayers with annual incomes exceeding $400,000, encompassing top tax brackets and major corporations. This strategy follows the Inflation Reduction Act signed in August 2022, which allocated $80 billion to reinforce the IRS, including $45.6 billion specifically for tax enforcement. Commissioner Werfel, in response to concerns, reassured a Senate committee that the focus would not be on lower-income citizens.
Tips to Avoid IRS Audits For individuals with W-2 income, the likelihood of an IRS audit remains low, yet there are practices to minimize the chance of attracting scrutiny. Firstly, avoid claiming prohibited deductions, such as donations to non-registered charities or political contributions. Ensuring compliance with IRS rules can prevent your tax return from being flagged.
Furthermore, timely tax payments are crucial. If unable to meet deadlines, it’s advisable to request an extension. Delayed filings can arouse suspicion of tax evasion, potentially leading to an audit. Maintaining tax records, now easily storable digitally, is also recommended, with a suggested retention period of at least three years for documentation. This preparation can prove beneficial in the event of an audit.