The Internal Revenue Service has a plan for how it will use the $80 billion it received in the Inflation Reduction Act to go after wealthy tax cheats.
First, Sarin explained that IRS software algorithms have a metric that allows it to launch a certain amount of audits for income groups each tax season. The audit rate for individuals making less than $400,000 will remain the same moving forward, she said, meaning audits for lower-income individuals will remain roughly the same level as in years past unless there is a significant population spike in that group.
IRS Commissioner Charles Rettig testifies before the House Ways and Means Oversight Subcommittee March 17, 2022, in Washington, D.C. "There is a noticeable difference between ranking taxpayers based on reported income and seeing how many people are in each category," Sarin said, "and then ranking taxpayers based on actual income and seeing how many people are in each income category."Officials suspect audits will likely grow in the $1 million and higher income groups once that occurs because they suspect some people hiding out in the $400,000-or-less income group are making much more but not reporting it.
Janet Yellen, U.S. Treasury secretary, speaks during a Senate Banking, Housing and Urban Affairs Committee hearing in Washington, D.C., Nov. 30, 2021. The IRS also plans to be more calculated in who it audits, using new tools and resources to flag suspicious activity indicating someone wealthy is pretending to be poor, rather than randomlyTo achieve this targeted approach, the IRS will use some $20 billion to update its antiquated systems and plans to hire sophisticated auditors trained at hunting down highly skilled, wealthy tax evaders and handling complex revenue audits.
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