IRS Auditing to Become More Fair
The IRS announced in September of 2023 that they plan to restore some equality to the auditing process. An audit is a formal investigation of a taxpayer’s financial information, to ensure that the information they reported on their tax return is correct. During the 2022 tax year, the odds that a millionaire was audited by an IRS revenue agent was just 1.1%. On the other hand, low income wage earners who claimed the Earned Income Tax Credit (EITC) were 5.5 times more likely to be audited.
How exactly does the IRS plan to make this process more fair? To start off, the Inflation Reduction Act has given the IRS some increased funding that would make this possible. The IRS is working on implementing improved technology as well as Artificial Intelligence (AI) systems, which will make it easier to audit wealthy taxpayers. The IRS is also prioritizing audits on high income taxpayers who have large amounts of recognized tax debt. In 2024, the IRS will be implementing multiple compliance efforts to target wealthy tax evaders. Additionally, the IRS has stated that audit rates for those earning less than $400,000/year will not increase and that there will be new safeguards to protect those who claim the EITC on their tax returns.
The IRS also plans to continue its work of warning taxpayers against potential scams and staying up to date with what scammers are trying to do. Similarly, the IRS is working with the federal government to build defenses against identity theft in the tax system, to ensure that tax refunds are going to the appropriate taxpayer.
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If you have questions or would like to consult with an attorney, contact the Indiana Legal Services Low Income Taxpayer Clinic at tax.clinic@ilsi.net or (812) 339-7668.
Claire Thiel,
Low Income Taxpayer Clinic Law Clerk