The IRS is ramping up its audit rates for large corporations, complex partnerships, and multimillionaires, thanks to a substantial funding boost from the Biden administration. By 2026, audit rates for corporations with over $250 million in assets will nearly triple, while complex partnerships and high-income individuals will also see significant increases. Despite these changes, the IRS reassures that individuals and small businesses earning under $400,000 won't face increased audit rates. This new focus underscores the importance of robust tax compliance and expert guidance.

Massive Funding Boost

• The IRS received a significant increase in funding from the Biden administration.
• Funding came through the Inflation Reduction Act (IRA) signed into law in 2022.
• $80 billion directed to the IRS.
• Goal: Nearly triple the audit rate to 22.6% by 2026.

Increased Audit Rates for Corporations

• Applies to corporations with over $250 million in assets.
• Current audit rate: 8.8% in 2019.

Focus on Complex Partnerships

• Target: Increase audit rates nearly 10-fold to 1% by 2026.
• Applies to partnerships with assets exceeding $10 million.
• Current audit rate: 0.1% in 2019.

Targeting Wealthy Individuals

• Aim: 50% increase in audit rates for individuals with annual income over $10 million.
• Expected audit rate: 16.5% by 2026.
• Current audit rate: 11% in 2019.

Assurance for Lower-Income Entities

• No increase in audit rates for individuals and small businesses earning under $400,000.
• Aligns with President Biden’s pledge not to raise taxes on this population.

Audit Process

• Involves meeting with an auditor to review the federal tax return.
• Auditor may request additional documentation to support claims.

Discrepancies can lead to:

• Tax evasion charges.
• Civil fraud penalty of 75% of the understated tax.
• In severe cases, jail time.

This detailed audit plan reflects the IRS's enhanced capacity to scrutinize high-value entities, backed by significant federal support.

To navigate the increasing scrutiny and complex tax landscape, retaining Mark Sullivan Consulting is essential. Our expertise in IRS audits and tax controversy will ensure your interests are protected. With personalized strategies and a deep understanding of federal tax laws, we provide unparalleled support and peace of mind. Trust us to be your steadfast ally in all tax matters.

Learn more at info@marksullivanconsulting.com or schedule a FREE 30-minute consultation with Mark Sullivan HERE

About the author

Mark W. Sullivan, EA founded Sullivan Consulting in 1998 in St. Louis, MO and relocated to Scottsdale, AZ in 2020. He specializes in federal tax controversy representation, appeals and consulting on behalf of individuals, businesses, law, and accounting firms nationwide. In addition, he has served as the consulting and expert witness in numerous civil and criminal cases in multiple federal district courts.

Mark has an unlimited Enrolled Agents license and is admitted to practice before the Internal Revenue Service based on his extensive experience as a Revenue Officer in New York, NY, St. Louis, MO and Washington, D.C..

Additional References: "The IRS says audits are about to surge — here’s who’s most at risk" Shannon Thayler, New York Post (May 3, 2024)

Copyright 2024 Per Diem Plus, LLC. Per Diem Plus proprietary software is the trademark of Per Diem Plus, LLC.®