IRS’s Plan Includes Increased Audits for Corporate and High-Income Taxpayers

On April 6, 2023, the Internal Revenue Service released its much-anticipated strategic operating plan. The plan outlines how the agency will use the additional $80 billion in funding from the Inflation Reduction Act. Of particular note is the IRS’s plan to ramp up audits of complex corporate and partnership returns, including audits of taxpayers with more than $400,000 of income.

Treasury Secretary Janet Yellen had explicitly directed the IRS not to increase audit rates for households and small businesses making less than $400,000 per year – criteria that IRS Commissioner Danny Werfel reiterated during a call with reporters on April 6.

The IRS said it plans to leverage data analytics and technology to audit complex tax returns and hire specialists to focus on audits of large companies, partnerships, and high-income individuals in fiscal year 2023. The IRS will also increase enforcement of cryptocurrencies and estate, gift, and employment taxation – areas where audits have decreased in recent years.

Corporate taxpayers and individuals earning more than $400,000 per year should be aware of the increased scrutiny and potential for audit. Taxpayers who took overly aggressive positions should factor the increased likelihood of examination into their analysis and take this as an opportunity to reevaluate their approach to federal income compliance.

The IRS’s report also includes plans to improve taxpayer services, enhance technology, and boost cybersecurity. If you have any questions about the IRS’s recent report or tax strategies, attorneys in LP’s Tax Planning Group are here to help.