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Increase Audit Chance from IRS with New Budget Hike?

The Inflation Reduction Act is jam-packed with new provisions regarding many things, from climate change to energy usage, and what is most concerning for the public, the new $80 billion funding to the IRS. With this new funding, the IRS is expected to be using $46.5 billion for tax enforcement. Janet Yellen, Treasury Secretary for the United States stated in a letter that small businesses and households earning less than $400k annually should be safe from potential audits, however, local experts say that may not be the case and small businesses should begin to get their numbers to avoid an audit.

Revenue Gap

One of the main reasons for this massive influx of funding for the IRS is meant to close the nearly $600 million in lost revenue from uncollected taxes. The treasury Department said in a statement “A large percentage of the resources to modernize the IRS will be used to improve taxpayer services – from answering phones to improving IT systems – and to crack down on the high income and corporate tax evaders.” IRS Officials say they want to return to historical levels of enforcement. The norm the IRS hoping for is 2010/2011 levels of enforcement.

Time to Clean Up Those Numbers

Businesses should be making sure they’re keeping good clean numbers and substantiating expenses properly. This increased funding will ensure the IRS will be taking all necessary steps to make sure your business has all of its “ducks in a row” to make sure they get the correct amount in taxes and don’t miss out on another $600 million in revenue as they have in the past due to outdated systems.

Another area businesses should pay attention to is complying with the employer mandate provisions of the Affordable Care Act. Under the current mandate, employers with 50 or more full-time employees must offer essential coverage to at least 95% of their workforce. Employers can be subject to penalties if at least one full-time worker receives a federal premium tax credit (PTC) on a Health Insurance Marketplace, all according to Joanna Kim-Brunetti, executive vice president of regulatory affairs at Trusaic.

Wrap Up

Even though many government officials claim this new IRS funding won’t increase audits for certain individuals and small businesses, many local experts are still skeptical that may not be the case. This makes it all the more important to have a great accountant in your corner, someone who can see areas of risk, and reward in your tax filings.

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