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Taxpayers have heard for years that the IRS has been woefully underfunded by Congress. This lack of funding has hurt the agency’s ability to identify and pursue those who commit various forms of tax fraud. In fact, the agency’s employment rolls had fallen to just 17,208 employees which represented a nearly 25% decrease since 2010. This decrease in agents and workers came despite increases in population and tax filings. However, the agency still employs numerous aggressive and strategic auditors who can identify all forms of tax fraud ranging from offshore tax evasion to payroll tax fraud. If you happen to end up on the IRS’s radar regarding a full or limited audit, there is a strong likelihood that your tax improprieties will be detected and pursued.
However, the era of limited manpower at the IRS appears to be coming to an end. The IRS recently announced plans to significantly bolster its ranks of agents and auditors who examine the taxes of businesses and individuals. The plan could mean that taxpayers will face a significantly heightened risk of a tax audit for mistakes and intentional wrongdoing found in their business and personal tax returns.
For about five years the IRS has been mired in what can probably be best described as a hiring freeze. However, the IRS recently revealed a memo detailing its plans to hire up to 700 additional enforcement agents to pursue tax cheats. IRS Commissioner John Koskinen has described the action as the agency’s “first significant enforcement hiring in more than five years.” However, the commissioner has warned that the hirings do not represent a return to full strength for the agency. Rather, the wave of new hiring wave will bolster the agency’s ranks while replacing agents who are retiring. The IRS commissioner stated that the new wave of hiring “will help fill key gaps in our enforcement workforce created by years of attrition and will provide existing employees promotion and developmental opportunities, including serving as mentors and instructors for the new staff.”
In fact, one of the IRS’s justifications for being able to hire new employees despite continued budgetary pressure is the fact that more senior agents are retiring. The departing agents are likely drawing much higher salaries than the new hires and may allow for multiple additional hires for each departing agent. The IRS commissioner also stated that the new hirings could be attributed to other departures at the agency and a number of unexplained “efficiencies that the organization has achieved. These enforcement hirings are much needed. Commissioner Koskinen summed up the agency’s problems stating, “At the end of the year, we believe we will be down more than 2,000 employees for the year, bringing our loss of employees to over 17,000 since 2010. More than 5,000 of those employees have been in our enforcement area. While adding 600 to 700 new enforcement hires will not replace those who have left, it will help fill key gaps in our enforcement workforce created by years of attrition and will provide existing employees promotion and developmental opportunities, including serving as mentors and instructors for the new staff.”
It is not known when exactly the new wave of hiring will result in a significantly bolstered IRS enforcement division. However, the IRS has indicated that it hoped to begin the first wave of hiring within the upcoming weeks. The agency has stated that job announcements will be posted internally and externally within the upcoming days. The positions will be concentrated primarily in the Small Business/Self-Employed division and will be posted for offices throughout the United States including in California. The commissioner also indicated that IRS Criminal Investigations (IRS-CI) is also likely to receive some new hires. He stated that new hires will include IRS special agents, employees for IRS’s Wage and Investment division, and chief counsel hirings. The second wave of hiring will focus on providing opportunities for employee promotion in higher-level tax enforcement positions. The hiring will also bolster the ranks in the Large Business and International Division, Tax Exempt and Government Entities division, and IRS Appeals.
This wave of hiring likely means that enforcement efforts will be significantly stepped-up. IRS Commissioner Koskinen has stated that every dollar invested into the IRS, “returns at least $4 to the Treasury.” This likely means that there will be an increase in audit and other enforcement activity. Taxpayers with unresolved tax issues are encouraged to discuss these concerns will a tax professional before they face enforcement action.