Topline
Sen. Elizabeth Warren (D-Mass.) and 24 other Senate Democrats asked the Internal Revenue Service to increase audits on richer households and large corporations after the agency received a boost in new funding last year, Bloomberg reported Thursday.
Photo shows part of a 1040 federal tax form printed from the Internal Revenue Service website, in … [+]
Key Facts
New audits should be focused solely on households earning more than $400,000 annually and large corporations, in an effort to ensure that “billionaires cannot avoid scrutiny by using tax-avoidance strategies to report low incomes,” the Democrats told the IRS in the letter.
Americans making less than $400,000 each year, particularly low-income families, should not face an increase in reviews from the IRS, the Democrats said in the letter.
The Democrats asked the IRS to ensure wealthy taxpayers are not audited at lower rates than low-income Americans, calling on the top 1% of wealthy Americans to “meet their responsibilities,” the letter said.
Key Background
From 2010 to 2019, the rate of taxpayer audits fell from 0.9% to 0.25% regardless of income, according to the Government Accountability Office. But audit rates decreased the most for Americans with incomes of $200,000 or more, the GAO found, with those making $5 million or more seeing the largest drop in audit rates, falling from 16% a decade ago to 2.4% last year. Meanwhile, an analysis of IRS data from Transactional Records Access Clearinghouse (TRAC) at Syracuse University found that households earning less than $25,000 annually were five times as likely to be audited by the IRS. Both the GAO and TRAC attribute these disproportionate audits to the effects of reduced staffing. Budget cuts left the IRS with 1,400 staffers to examine the returns of 164 million taxpayers in fiscal year 2022, leading the agency to rely on the “highly automated” process of correspondence audits, or sending letters in the mail, TRAC said. Audits for low-income Americans are generally more automated, the GAO found.
Tangent
Last year, the IRS received an $80 billion increase in funding for 2022-2031 through the Biden Administration’s Inflation Reduction Act. Over the next decade, that investment is expected to bring in an additional $204 billion in revenue, according to projections from the Congressional Budget Office.
Big Number
626,204. That’s how many individual income tax returns were audited in fiscal year 2022, of the more than 164 million individual income tax returns that were filed, according to TRAC.
Further Reading
Better-Funded IRS Should Increase Audits Of The Top 1%, Democrats Say (Bloomberg)
Source: https://www.forbes.com/sites/anafaguy/2023/03/16/democrats-urge-more-audits-on-wealthy-americans-big-corporation-from-irs/