The IRS’s goals for spending $60 billion in new funding are beginning to become clearer as the IRS unveils a series of new enforcement initiatives, including plans to launch coordinated audits of large partnerships and hire 3,700 new agents.
The Inflation Reduction Act gave the IRS an unprecedented $80 billion in supplemental appropriations, with the majority statutorily dedicated toward enforcement. The debt limit agreement earlier this year is set to claw back $20 billion, but the IRS still has ambitious plans for the remaining $60 billion.
The IRS recently announced a series of enforcement initiatives, including:
- Opening 75 audits by the end of September of the largest partnerships in the U.S., with an average of $10 billion in assets.
- Beginning a compliance campaign in October geared toward 500 high-risk partnerships with $10 million or more in assets
- Intensifying collection work on taxpayers with $1 million in income and $250,000 in outstanding tax debt
- Targeting FBAR violations, digital asset transactions, and fraudulent labor brokers who issue Form 1099s to subcontractor shell companies
Partnership audits are a major focus, and some of the IRS activity will be driven through the Large Partnership Compliance Program that launched in 2021 to examine some of the largest and most complex partnership returns. The IRS is also creating a complementary new unit within the IRS Large Business and International division dedicated to auditing partnerships and S corporations.
The IRS is seeking to hire 3,700 new revenue agents to ramp up these and other enforcement activities directed at complex partnership and large corporations.
Grant Thornton Insight:
The IRS now has direct hire authority, making it easier to onboard prospective employees, but it will still be difficult to fill 3,700 positions. Nonetheless, taxpayers should expect enforcement activity to begin increasing relatively quickly. Although much of it is geared toward partnerships, high-income individuals and large corporations will also face more scrutiny.
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