A recent report from Syracuse University’s Transactional Records Access Clearinghouse (TRAC) has revealed that the Internal Revenue Service (IRS) has been preferentially targeting lower-income taxpayers over millionaires and billionaires. This follows last year’s Inflation Reduction Act which allocated $80 billion to the agency. Despite this additional funding, the IRS has chosen to use correspondence audits to target lower-income taxpayers who have an audit rate of 1.27 percent, five and a half times that of everybody else.
The Biden administration and some journalists have suggested that the new funding will not lead to increased audits for those making less than $400,000 annually, however it appears that the IRS has other incentives to audit lower-income taxpayers. The Congressional Budget Office estimates that it will take three years for new hires, with experience in the field, to reach full capacity, making it difficult for the IRS to target wealthy individuals.
The IRS has been plagued with various issues in the past, including sending wrong child welfare payments, leaking personal information of 700,000 taxpayers, and going after middle-class expats. These issues, combined with the IRS’s preference for auditing lower-income taxpayers, has caused people to question the agency’s ability to target the wealthy.
Though some may argue that the IRS should not exist, it is clear that the agency needs more than just funding to fix its longstanding issues. As the IRS’s capacity and tenacity increase, taxpayers should be aware that the agency may continue to target lower-income taxpayers and that wealthy taxpayers may face increased scrutiny.