What does "Share" of Audits Mean?

The IRS finally released some details on their budget for the extra $80 billion over 10 years. However, it is lacking on key details.

The IRS finally released their report on how they plan on spending the extra $80 billion that Congress authorized last year. However, if I was a teacher handing out a grade, the report would barely get a D+.

It is lacking on details and still has not addressed how many extra taxpayers making less than $400,000 will be audited each year. President Biden has stated many times that taxpayers making less than $400,000 will not see additional audits.

However, Treasury Secretary Yellen has come out and “clarified” that the share of audits for those making less than $400,000 will not increase. This is dramatically different from what President Biden communicated.

Here is a quote from page 64 of the report:

“Pursuant to Treasury’s directive, small businesses and households earning $400,000 or less will not see audit rates increase relative to historical levels.”

In my opinion, this means that if 65% of the audits were for taxpayers under $400,000 of income, then going forward up to 65% of the audits will be on these same taxpayers.

If the IRS plans on auditing an extra 200,000 taxpayers each year, then about 130,000 of these audits will be on taxpayers making less than $400,000. However, the details in this plan are vague at best and it will be several years before we know the results and Congress may decide to reduce funding in the next couple of years.

We already know that about 300,000 accountants have left the profession since the pandemic, and it will be difficult for the IRS to hire enough auditors to even replace the ones that are retiring in the next five years.

We will keep you posted.