Will the budget increase affect the audit rate next year? It’s the big question of the new year. In September of 2021, the Congressional Budget Office announced a proposal to increase funding for the IRS. The amount includes $80 billion over the next ten years. The argument is that doing so would ultimately increase the revenue the organization is able to generate. They think that money generated from that increase in budget could be over $200 billion throughout the next decade.
A significant portion of the new money ($60 billion) is aimed at empowering enforcement actions in particular. Meaning by 2031, the IRS will double the number of people working for it. And will have a 90% higher budget than they do right now.
This, of course, leads to the next question. Does the bigger budget mean more people are about to get audited?
The situation is far more nuanced than people on both sides of the aisle are giving it credit for. Therefore, understanding what this means and the implications it may have may help answer these questions.
The Current Situation With the IRS: What You Need To Know
Some folks believe YES, this would increase the audit rate
While it’s difficult to say exactly what the future might hold, some Republicans believe that the plan would indeed increase the rate at which people are audited. House Minority Leader Kevin McCarthy, for example, cited research saying that the funding would lead to an increase of 1.2 million additional audits each year compared to those that are taking place right now. More than that, he claimed that roughly 50% of them would target homes making under $75,000 per year.
Other don’t believe the audit rate would be affected at all
Others are not quite as pessimistic about the situation. According to a report filed in September from the CBO, it’s estimated that the new funding won’t necessarily lead to a “major increase” in audits in the strictest sense of the term. It’s just that the IRS has been understaffed and underfunded for a long time. They haven’t been able to operate at their “normal” level of activity for years.
Therefore, the increase in the budget – and the new employees that it will bring with it – will simply allow audit levels to rise to where they were roughly 10 years ago. It’s an increase over recent memory, yes — but historically, that isn’t necessarily the case.
Despite all this, the United States Treasury has reiterated its goal. That is, for the audit rate to not increase for households that make under $400,000 per year. But again, it’s difficult to know exactly what the future will bring with it. This is why this is one situation that many will be paying attention to moving forward.
Need more information about whether the IRS’s new budget increase will impact the audit rate? Or, if you’d just like to discuss your own needs with someone in a bit more detail, please feel free to contact our office today.
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