President Biden has recently announced his intentions to increase the funding for the IRS by $80 billion over the next ten years. This comes on the back of a separate proposal to immediately increase the agency’s funding by $1.2 billion, which would represent a more than 10% increase from what is currently allocated. The proposed financial commitment is intended primarily to fund government programs that will aggressively target tax fraud that leads to the tax gap of perceived unpaid federal taxes that the IRS has previously been unable to penetrate. If you are concerned about the impending crackdown and believe that you may become the subject of a government audit, criminal tax investigation or lawsuit, it is in your best interest to speak to one of our experienced dually licensed Tax Compliance Attorneys and CPAs as soon as possible. Call today at (800) 681-1295.
Government Plans for Increased IRS Funding
Over previous years, the IRS’ capabilities have been severely scaled back due to a series of budget cuts and layoffs. Only 0.01% of all S corporations who filed in 2018 were audited, according to information released by the agency. But IRS Deputy Commissioner De Lon Harris claims that the IRS has plans to increase agency activity by “50% more than [the IRS] had in the previous year.”
Due to a proportional increase in the responsibilities of the government agency, such as the mailing of Covid relief checks to struggling families across the country, the government has decided that the IRS deserves a larger arsenal. While the Covid Relief bill passed in December 2020 included certain increases in funding apportionments for the IRS, agency officials have made it clear that an additional, more significant increase in capital is necessary to ensure that the IRS can meet all its goals, including the investigation and prosecution of the wealthiest taxpayers. IRS Commissioner Charles Rettig has stated publicly that the discrepancy between the amount of money in taxes owed and the amount that is collected could approach up to a trillion dollars per year.
IRS Expansion to Take on More Audits in 2021
The government is using the advice of former high-ranking IRS officials to implement change in the agency. According to a fact sheet released by President Biden, the increase in funding will
- Revamp IT capabilities to allow for faster processing of data from audits
- Increase the agency’s oversight capabilities of tax returns
- Establish minimum audit levels for high-income individuals and corporations
- Enact requirements forcing banks to make disclosures about deposits and withdrawals
Many of these suggestions have been in the Washington pipeline for years, but recent trends and statements suggest that Congressional leaders from both the Democrat and Republican parties will likely support legislative action to these ends. The Congressional Budget Office released a report in July 2020 that estimates a $20 billion increase in IRS funding over the next decade would create $61 billion in revenue – effectively paying for itself.
Critically, the new IRS strategy also involves a different method for the implementation and execution of audits. Congressman Kevin Brady (R-TX) stated that the IRS will have to be “smarter” about the way it carries out audits, since previous, more randomized determinations often fail to discover some of the more sophisticated strategies of shielding & evading taxable income from the eyes of the government.
The government’s allocation of additional funds comes with an expectation that they will put that capital to use for investigating the financial dealings of wealthy individuals and corporations who may owe more in taxes than they are claiming. It is safe to assume, therefore, that the IRS will conduct more audits, and it is likely that these forthcoming audits will carry a higher level of scrutiny.
Ensuring That You Are Protected from an Increase in IRS Audits
Countless well-meaning individuals and businesses submit incorrect information to the IRS every year without even knowing it. In the recent past, the IRS may have overlooked these mistakes due to lack of resources, time, or technological savvy. However, now that the government is ramping up its effort to examine taxpayers’ pockets, it is critical that you ensure your compliance with the tax code in all past, present, and future dealings. A mistake can easily be corrected by identifying it early and raising it with the IRS prior to an audit. Unfortunately, not identifying the issue and proceeding forward without taking active steps to fix the situation can have costly consequences down the road. Here are some quick tips to keep you in the best position.
Invest Time in Quality Record-Keeping
Whether you choose to employ a third-party tax professional, use a software program or handle everything in-house, bear in mind that most audit-triggering discrepancies occur because of poor record keeping and organization strategies. Make sure that your process is sound and reliable, so that you minimize the chances of simple mistakes.
Keep Up with Tax Code Changes Due to COVID-19
Complying with the Internal Revenue Code, (IRC) will present more challenges in 2021 than in years past because legislative changes have been frequent and sweeping. Make sure that you consult a tax professional about any of the new changes to the code that might affect deductions or other aspects of your tax filings.
Always remember that, ultimately, you are responsible for your own tax return, even if you enlist the help of a tax professional. If your financial circumstances are more complicated than average, you should not be scared off from opting to use a tax professional instead of a software program. However, if the person that you entrust with filing your returns is prone to making mistakes, you will be the one facing IRS scrutiny.
If you are already the subject of an audit or have not yet been audited but are unsure about your past or present status, you should enlist the support of an experienced Tax Compliance Attorney and CPA who is familiar with the evolving practices of the IRS. An attorney can help you begin the process of ensuring your history of compliance, and if the attorney discovers inconsistencies, you will require an attorney to help you navigate the voluntary disclosure process that will rectify your filings and fortify your defense against any future government action.
Note: As long as a taxpayer that has willfully committed tax crimes (potentially including non-filed foreign information returns coupled with affirmative evasion of U.S. income tax on offshore income) self-reports the tax fraud (including a pattern of non-filed returns) through a domestic or offshore voluntary disclosurebefore the IRS has started an audit or criminal tax investigation / prosecution, the taxpayer can ordinarily be successfully brought back into tax compliance and receive a nearly guaranteed pass on criminal tax prosecution and simultaneously often receive a break on the civil penalties that would otherwise apply.
It is imperative that you hire an experienced and reputable criminal tax defense attorney to take you through the voluntary disclosure process. Only an Attorney has the Attorney Client Privilege and Work Product Privileges that will prevent the very professional that you hire from being potentially being forced to become a witness against you, especially where they prepared the returns that need to be amended, in a subsequent criminal tax audit, investigation or prosecution.
Moreover, only an Attorney can enter you into a voluntary disclosure without engaging in the unauthorized practice of law (a crime in itself). Only an Attorney trained in Criminal Tax Defense fully understands the risks and rewards involved in voluntary disclosures and how to protect you if you do not qualify for a voluntary disclosure.
As uniquely qualified and extensively experienced Criminal Tax Defense Tax Attorneys, KovelCPAs and EAs, our firm provides a one stop shop to efficiently achieve the optimal and predictable results that simultaneously protect your liberty and your net worth. See our Testimonials to see what our clients have to say about us!
Call Our Tax Attorneys and CPAs Today
Audits are an unpleasant concept to consider, but our experienced IRS tax audit professionals can begin working immediately to make sure that you are compliant. Call us today for a consultation at (800) 681-1295.
More Commonly Asked Tax Audit Questions
- How should Tax Audits be Handled by Criminal Tax Counsel?
- How to survive audit when I cheated on return being audited
- What is an eggshell audit?
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- Why is a reverse egg shell audit dangerous for a taxpayer?
- Warning signs of a criminal referral from an IRS audit
- Effective tax defense counsels goals in an egg shell audit?
- How are the 4 goals and outcomes 1 and 2 best obtained?
- What are the possible outcomes of an egg shell audit?
- Is it my right to know why I was selected for examination?
- What can I do to prepare for an audit?
- What is an IRS civil examination?
- How IRS decides which tax returns are audited
- What are my appeal options if I disagree with IRS?
- What are my basic taxpayer rights if the IRS audits me?
- Options if I am unable to pay at the conclusion of audit
- What a 30 or 90-Day Letter from the IRS means
- What is involved with appealing disagreements?
- Rights to disagree with IRS tax auditor’s findings
- Can I stop the IRS from repeatedly auditing me?
- Can I have the examination transferred to another area?
- Can I record my IRS interview and is it a good idea?
- How many years of returns are at risk during an audit?
- Common reasons for the IRS to conduct a tax audit
- How to avoid negative consequences from an IRS interview
- Have to agree to interview by taxing authority directly?
- Are all audits the same?
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- Your rights during an IRS tax audit
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- Don’t go into an IRS audit without representation
- Why hire an attorney to represent me in an audit?
- Why hire David W. Klasing to represent me in an audit
