After years of being sorely underfunded, the IRS has finally received an allocation of $80 billion meant to boost its capacity under the Inflation Reduction Act. With this new funding, the agency has set out to address the problems it has been facing by focusing on four key areas, namely:
- Enforcement, which will be allocated $45.6 billion
- Operations support, which will be allocated $25.3 billion
- Business system modernization, which will be allocated $4.8 billion
- Taxpayer services, which will be allocated $3.2 billion
More Audits on High-Income Taxpayers
The Biden administration is keen on ensuring high-income taxpayers meet their mandates, and one way it tends to achieve this is through the expansion of tax audits.
This move comes in the wake of a statement by Democrat senators, which said in part that the high-income taxpayers in America account for over one-third of the total unpaid federal income tax. Yet, despite this, this category of taxpayers has had their audit rates significantly decline from over 16% a decade ago to 2.35% in 2019.
It is this gap that the IRS intends to bridge by carrying out more tax audits on high-income taxpayers. The plan is to address high-dollar compliance issues as wealthy Americans, large corporations, and partnerships have complex tax returns, which without proper audit, leads to non-compliance.
An Easy Way to Stay Compliant With IRS Regulations
With the IRS planning on leveraging technology, especially data and analytics, to ensure compliance with the latest regulations, it is vital to protect yourself as a taxpayer or business. This is best done by:
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Having a reliable tax attorney
As a high-income taxpayer, it is best to prepare all your taxes after consultation with a reliable tax attorney. These tax experts will help break down the complicated tax code, providing insights on how best to comply with IRS regulations. This way, you can avoid oversights or mistakes that might be misinterpreted as tax avoidance, leading to complicated audits or court cases.
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Always being honest
The rule of thumb regarding taxes is that honesty is always the best policy. It is crucial that you report all relevant figures, including your actual income, deductions, and investments, to avoid being a target for audits and consequential impacts such as fines and penalties.
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Keeping good records
You need to keep documentation of everything that relates to your taxes. All the paperwork and receipts that support your tax returns should be appropriately arranged and safely stored where they can easily be accessed. Do not overlook anything when preparing your records, be it a charity donation or documents that support an itemized deduction for ease in doing your taxes and facing audits.
Facing an Audit? Worry Not
As the IRS works on increasing tax audits among wealthy Americans, there is a good chance that you might face an audit. As a taxpayer, this should not lead to panic as a tax audit does not indicate wrongdoing; instead, it is a move by the agency to ensure compliance.
Nevertheless, for the best outcome, it is highly advisable to seek attorney services to avoid making mistakes that could complicate your audit. In Atlanta, Cumberland Law Group is ever at hand to help you manage, resolve, and settle all tax matters.
