Will the IRS Be Focusing on Auditing the Wealthiest Taxpayers?

The IRS has always come under scrutiny regarding its auditing targets. Less than 1% of tax returns are actually audited every year, and the budget of the department continues to be cut, so this is likely to go down even further.

A new report from the Inspector General criticized the IRS for not auditing enough of the wealthiest taxpayers in the US. So will the IRS be refocusing its efforts to target this group?CashWad

How the IRS Decides on Audits

The reason why the IRS has always concentrated on the $200,000 income bracket is because there was supposed evidence of non-compliance. Ultimately, this department is about targeting taxpayers who could likely yield additional funds for the government. This has been criticized because it’s been unsuccessful so many times.

Changing the Game

The IRS is actively considering linking $200,000 with inflation. This would mean it’s no longer considered to be a ‘high income’ in the eyes of the IRS. It’s a significant move because for so long the bracket gained the brunt of the IRS’s auditing power.

There’s no word on whether the IRS intends on auditing the super wealthy any more than before, though.

What Does this Mean for You?

For you it means that likely nothing has changed. If you earn below six figures, the chances of you receiving a visit from the IRS is slim to none, unless you’re blatantly trying to swindle them. It’s not in the government’s financial interest to harass small-time earners.

On the other hand, the IRS won’t shift its focus entirely. The fear of an audit is one of the department’s most powerful compliance tools. Concentrating solely on the rich would compromise that.

Image credit: Jeff