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White House Says More IRS Funding Won’t Increase Audits for Lower Income Americans

On Monday, the Biden Administration received major backlash regarding concerns about the new $80 billion for the IRS in the Inflation Reduction Act package. The funding was intended to help the IRS crackdown on the collection of under-reported income from small businesses and wealthy individuals and prevent tax evasion. The concern is that this new influx of funding could increase audits on lower-income households, even though the White House denied this would be the case.

The Commissioner’s Letter

The IRS Commissioner, Chuck Rettig wrote a letter last week which ensured the American people that this recent funding will not increase audits on households earning less than $400,000. “These resources are absolutely not about increasing audit scrutiny on small businesses or middle-income Americans,” Rettig wrote in the letter. “As we have been planning, our investment of these enforcement resources is designed around Treasury’s directive that audit rates will not rise relative to recent years for households making under $400,000.” This influx of funding provided by President Biden was among one of his top priorities within the Inflation Reduction Act that was recently passed earlier last week.

Still Concern Over more Audits Despite Claims

Democrats project that the effects of this funding could bring in roughly an extra $124 billion in federal revenue over the next decade by hiring more tax enforcers to help limit tax evasion by rich individuals and corporations. It is estimated that roughly $1 trillion in federal taxes goes unpaid each year because of multiple reasons like errors, fraud, and lack of resources to adequately enforce collections.

However, many republican lawmakers still believe that this new funding can have serious ramifications for lower-income workers despite what the White House says. The IRS notoriously targets lower income earners when they conduct their tax audits each year. According to a recent analysis of tax data conducted by the Transactional Records Access Clearinghouse (TRAC) at Syracuse University. Households with less than $25,000 in earnings are five times more likely to be audited by the IRS than anyone else. Rettig still argued that hiring more enforcement officers and modernizing their technology could help the IRS avoid auditing honest taxpayers.

Wrap Up

Time will tell if the White House is being truthful regarding its claims of the new IRS funding not increasing audits for lower-income taxpayers. Regardless it is always important to know how to correctly go through the process of paying the right amount of taxes each tax year to avoid any problems with the IRS. If you ever need assistance, give us a call.

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