IRS’s Enhanced Auditing Power: A Wake-Up Call for High-Income Individuals and Corporations

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Executive Summary

Dustin Stamper, a managing director at Grant Thornton, has warned that the IRS, having received $60 billion over 10 years in addition to its annual appropriation, is now able to hire more experienced workers to conduct audits on both companies and individuals. The IRS is currently offering higher pay to attract midcareer professionals who can immediately contribute to the audit team. Stamper anticipates a surge in audit activity in the near future, and anticipates that high-income individuals, partnerships, and C corporations will see the most significant increase in examinations. The IRS will also focus on issues such as research and development credits, partner capital accounts, energy credits, and digital assets in its audits.

 

IRS’s Enhanced Auditing Power: A Wake-Up Call for High-Income Individuals and Corporations

 

The Internal Revenue Service (IRS) is set to undergo a transformation in the coming years, thanks to a significant budget increase that will enable it to pursue more audits across the board. With an infusion of $60 billion over the next 10 years, in addition to its annual appropriation, the IRS has the resources to hire mid-career professionals who can immediately contribute to the agency’s objectives. 

This crucial information was shared by Dustin Stamper, a managing director at Grant Thornton, during the recent AICPA & CIMA ENGAGE 2024 event in Las Vegas. Stamper, who leads the tax legislative affairs practice at Grant Thornton’s National Tax Office in Washington, D.C., explained that this financial boost will significantly change the way the IRS operates.

According to Stamper, the IRS is seeking to attract experienced professionals by offering higher salaries than in the past. This move is a departure from the agency’s previous practice of hiring fresh graduates and investing significant time in their training. The aim is to fill the ranks with mid-career professionals who can immediately contribute to the agency’s objectives, particularly in the area of audit activities.

The budget increase, which is a result of political maneuvers, may not be the original $80 billion that was allocated to the IRS through the Inflation Reduction Act of 2022, but it is still a game-changer for the agency. “The IRS that you are dealing with today or dealt with last year is not the same IRS that you’re going to be dealing with in two to three years,” Stamper said. 

This financial leap means that the IRS now has both the funds and the staff to conduct audits on a wider scale. While high-income individuals and partnerships will see the largest increase in examinations, other entities such as C corporations will also be targeted. Stamper emphasized that the IRS now has the budgetary flexibility to pursue multiple priorities simultaneously, which will lead to increased audit activity across the board.

In its annual update to its Strategic Operating Plan, the IRS reported a 9% increase in the number of revenue agents compared to the previous year. IRS Commissioner Danny Werfel shared in March that the Service is focusing its enforcement efforts on high-income groups. 

Furthermore, the IRS is set to focus on particular issues during audits. Research and development credits, partner capital accounts, energy credits, and digital assets are some areas that will attract the agency’s attention. Stamper also highlighted the IRS’s plans to use new technology to conduct a holistic analysis of partnerships.

Stamper’s insights signal a new era for the IRS, marked by increased audits and a focus on high-income individuals and corporations. This transformation, fueled by a significant budget increase and an influx of experienced professionals, will undoubtedly impact the tax landscape in the coming years. As Stamper rightly stated, the IRS we knew is evolving, and taxpayers, corporations, and tax professionals must be prepared for this change. 

For over 100 years, Packer Thomas has served generations of business owners, families, and others with tax, auditing, accounting, and information technology services. But we didn’t last that long by standing still. We’ve evolved to meet the needs of our clients who are also facing challenging changes in their financial, tax, and information technology environments.

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