The Internal Revenue Service wants to hire more accountants, lawyers and other professionals to focus on high-income taxpayers and large corporations that are not paying all their taxes.
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"The IRS will focus the Inflation Reduction Act enforcement resources on hiring the accountants, attorneys, engineers, economists and data scientists needed to pursue high-income and high-wealth individuals, complex partnerships, and large corporations that are not paying the taxes they owe," said the agency's statement. "Given the increase in filing populations over time, the complex nature of the tax filings and the IRS's inability to keep pace due to lack of resources, it makes sense to focus initial Inflation Reduction Act implementation efforts exclusively on increasing our capacity to assess compliance of high-income and high-wealth individuals, complex partnerships, and large corporations. The IRS has no plans to increase the audit rate for households making less than $400,000."
The data book provided an overview of the IRS's activities during fiscal year 2022 from Oct. 1, 2021, to Sept. 30, 2022, including the amount of revenue collected and tax returns processed by the agency.
The service noted that in many areas, the statistics reflect the impact of past resource constraints on its ability to provide adequate taxpayer service and address compliance issues, including audits of higher-income taxpayers, partnerships and large corporations. Those constraints will presumably be addressed by the extra $80 billion, and the IRS's timeliness appears to have improved this tax season.
For FY 2022, the gross collections of the IRS totaled more than $4.9 trillion, or about 96% of all government funding. When compared against the cost to fund the agency, the ratio of costs to revenue was 29 cents per $100 collected for 2022, the lowest cost to taxpayers in the history of the agency.
The IRS issued $50.9 billion in payments to taxpayers during FY 2022 as a result of legislation passed by Congress in response to the COVID-19 pandemic. Of this, $3.7 billion were classified as Economic Impact Payments and $47.3 billion were considered Advance Child Tax Credits.
For 2022, the results of the Comprehensive Taxpayer Attitude Survey showed improvements in taxpayer interactions with the IRS. After a decline in satisfaction from 2019 to 2021, there was a significant increase in satisfaction in 2022, rising to a score of 78%, up from 75% in 2021.
The IRS processed over 262.8 million federal tax returns during FY 2022. Of those, 160.6 million were the tax returns of individuals, and of that total, 150.6 million were e-filed, or almost 94% of all individual tax returns.
The IRS noted that its audit rates have been declining, which is one reason why it wants to hire more employees for tax examinations and audits. However, its audit rate data is not the most up to date.
The 2018 information is the most recent year the IRS has final audit rate data because it's the most recent tax year for which the statutory period has closed, so in most cases no new audits will be started and the audit coverage rates for that year should be final.
Tax year 2018 audit rates for taxpayers with over $10 million in total positive income were 9.2%, down from 13.6% for tax year 2012. Over the same period, the overall corporate audit rate fell from 1.3% to .6% and the audit rate for partnerships fell from 0.3% to 0.1%.
The IRS stressed that in the Strategic Operating Plan it released earlier this month, the agency is focusing on pursuing high-income and high-wealth individuals, complex partnerships and large corporations that are not paying the taxes they owe. As a result, the IRS said it has no plans to increase the audit rate for households making less than $400,000.
