Ever since the Inflation Reduction Act passed allocating $80 billion to the IRS, we’ve wondered what the impact would be. I can still hear President George H. W. Bush promising a “kinder and gentler” IRS a few years ago. That’s no longer what the government is promising us. When Congress struck a debt ceiling deal in June, Republicans succeeded in stripping away $20 billion of the $80 billion. That still leaves $60 billion to beef up the IRS. How will they spend it?
On September 8, 2023, we learned the plan. Here are some highlights:
- Increased scrutiny of those earning over $1 million or owing tax of over $250,000.
- Full audits of the 75 largest partnerships in the U.S., as well as other large partnerships with balance sheet discrepancies, or where asset valuations appear inflated or deflated.
- Sending compliance letters to about 500 other partnerships (hedge funds, real estate, large law firms, publicly traded partnerships) and auditing those with unsatisfactory responses.
- Special attention to digital assets and currency exchanges through the “Virtual Currency Compliance Campaign.”
- Added efforts to audit owners of foreign bank accounts (FBAR reports).
- Hiring some 3,700 more auditors to do this work under a new unit for the audit of complex tax returns.
- Using Artificial Intelligence to help select those most likely to be tax cheats (just imagine all the possibilities advanced technology provides the IRS).
The IRS is aiming to close a tax gap of $700 billion that it believes goes uncollected each year.
The Blum Firm is here for you if you are targeted by this beefed-up IRS. Indeed, we have likewise “beefed-up” our team of tax lawyers with the recent addition of Christopher Beck to our tax staff. Christopher joined us from Boston with over 15 years of experience in tax controversy work.
So, if you are contacted by someone who says, “I’m from the government, and I’m here to help you,” please know that The Blum Firm also stands ready to really help you.
Marvin E. Blum
In preparing this post, Marvin acknowledges the help of Susan Lipp’s Wealth Management article “IRS Targets Large Partnerships and Millionaires” as well as Barron’s article “IRS Steps Up Audits of Partnerships, Wealthy Individuals.”
With the October 15 tax deadline just behind us, Marvin Blum warns that dealing with the “new” beefed-up IRS is about to get even more complicated.