IRS sets ambitious audit increase targets

 

In a recent update to its long-term strategic operating plan, the IRS pledged to significantly increase audit rates for large corporations, high-income individuals and large partnerships by 2026, using additional resources from the Inflation Reduction Act.

 

The audit goals highlight how the agency plans to significantly ramp up enforcement efforts following the influx of tens of billions of dollars from the 2022 law.

 

The IRS pledged the following increases in audit rates:

  • Audits rates for corporations with assets over $250 million are set to nearly triple from 8.8% in 2019 to 22.6% in 2026.
  • Audits on partnerships with assets over $10 million will increase tenfold from 0.1% in 2019 to 1% in tax year 2026.
  • Audit rates for individual taxpayers with total positive income over $10 million are projected to increase from 11% in 2019 to 16.5% in 2026. 
 
Grant Thornton Insight:

Even with the $20 billion reduction in the IRA’s original allocation of enforcement funding, the IRS retains nearly $60 billion in extra funding. This is enough to affect transformational change and the agency, and audit rates will increase well before 2026. Enforcement activity is already increasing in many areas and taxpayers should proactively assess substantiation and support for important tax positions, including transfer pricing, R&D credits, energy credits, partnership transactions, and partner basis and capital accounts.

 
 

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