According to a statement recently released with the IRS's annual Data Book, which covers activities for the fiscal year 2021, the agency is working to increase audit rates for the wealthiest Americans.
While declining audits have drew congressional attention, the percentage of filers earning more than $100,000 has doubled to more than $10 million in the last seven months, according to the statement.
Furthermore, because audits of higher-income taxpayers typically occur later in the statutory period — within three years of a filing — audits for 2019 may continue until at least 2023, according to the IRS.
Despite this, the IRS claims that "resource constraints" have limited the agency's ability to audit high-net-worth individuals, large corporations, and complex business structures, and that audits have decreased significantly since 2010.
"Audit rates for taxpayers with incomes of more than $200,000 decreased the most," Ken Corbin, the agency's chief taxpayer experience officer, told the House Oversight Subcommittee in May. "This is largely because higher-income audits tend to be more complicated and require auditors to manually review multiple issues."
According to a May IRS statement, the agency still only has 6,500 agents to handle audits for high-income filers.
Despite the IRS's announcement in March that it would hire 10,000 workers to address the agency's backlog, Corbin admitted that hiring has been difficult. On Wednesday, the agency issued a new job posting for 4,000 representatives.
According to a 2021 report from the Treasury Inspector General for Tax Administration, IRS audits decreased by 44% between fiscal years 2015 and 2019. Audits fell by 75% for filers earning $1 million or more, and by 33% for low-to-moderate-income earners claiming the earned income tax credit, or EITC.
Returns claiming the EITC have "historically had high rates of improper payments and therefore require greater enforcement," according to Corbin, who testified before the House Oversight Subcommittee in May.
Audits are generally less complex and may involve an automated process for lower-income filers because many of them are wage earners.
According to a May report from the Government Accountability Office, Americans earning more than $5 million per year had just over a 2% chance of being audited in 2019, compared to more than 16 percent in 2010.
Budget cuts, which have dropped to $11.9 billion for fiscal 2021, down $200 million from 2010, as well as limited staffing, are cited as the primary reasons for the decline.
By fLEXI tEAM