Major Influx to IRS Auditors, and How Taxpayers Will See the Effects

The Internal Revenue Service (IRS) is hiring thousands of new auditors as it gears up for a potentially massive tax-enforcement push if Congress passes an infrastructure plan that includes $40 billion to expand audits on the wealthy. What does this mean for audits, taxpayers and the IRS as a whole? We’ve explained.

Rapid Increase in Number of Auditors

The IRS has lost roughly 17,000 staff auditors over the past decade and is looking to make up for this lost ground. Their goal is to ensure that their small business and criminal investigations divisions will significantly grow.

• The small business unit is posed to add roughly 1,300 revenue agents, and an additional 700 general employees before the end of September. This is a significant jump compared to the only few hundred new people they have added total in the past years.
• The criminal investigation division will add over 500 new people and special agents within this year alone, which is nearly double the roughly 330 new people they have hired in the last five-year period.

What This Means for Taxpayers

Taxpayers, especially the wealthy, can expect an increase in auditing. The audit process will also look different and likely extremely involved. This is because while audits used to use a profit lost system, they will now follow more of an in-depth balance sheet approach. Being prepared for this change in process is crucial for high earners.

This is the largest growth for the IRS in over two decades and is happening at an extremely rapid rate, and could have major implications for taxpayers. Audits have always been a grueling process, and this will mean more people will face this process and be met with scrutiny.

Focus of New Auditors

There has been much criticism by the public recently that the IRS has allowed big companies to under-report or not pay their taxes, and that the IRS is ignoring this issue due to gaps in their auditing practice. These gaps are said to be the root of this increased auditing. Another intended focus of these auditors is surrounding the surge in crypto currency market activity over the past few years, both nationally and internationally. Examining these exchanges more closely and ensuring these transactions are reported to their full extent will be a large part of this increased auditing.

To learn more about what to expect, we would be happy to consult you on how these changes may impact you or your company.  Contact your partner at Fineman West to discuss: infor@fwllp.com or 213-688-9898.