IRS has been under pressure over the increasing share of audits on lower-income taxpayers.
Washington: The IRS would ramp up audits on higher-income taxpayers with funding proposed for fiscal 2021, Treasury Secretary Steven Mnuchin said Tuesday.
The agency has been under pressure over the increasing share of audits on lower-income taxpayers, while its audit rate has plunged for those at the upper end of the income scale.
“I have specifically directed the IRS commissioner to come up with a plan to increase the amount of funding so that we can audit more high-income earners, so that is specifically in our plan,” Mnuchin said at a Ways and Means Committee hearing.
He was responding to questions about President Trump’s 2021 budget request and disparities between audit rates on lower- and higher-income taxpayers.
Rep. Judy Chu (D-Calif.) said 30 percent of taxpayers at the top of the income scale were audited about a decade ago but just 7 percent of them faced audits in 2018. Meanwhile, those at the low end, particularly taxpayers who claim the Earned Income Tax Credit (EITC), now account for 39 percent of all audits, she said. (EITC, is a benefit for working people with low to moderate income. EITC reduces the amount of tax you owe and may give you a refund.)
Chu urged Mnuchin to ensure that new auditors whom the IRS would hire under the proposed budget focus on the wealthy.
In addition to $12 billion in funding for the IRS for 2021, the budget called for an additional $400 million, called a cap adjustment, to “fund new and continuing investments in expanding and improving the effectiveness and efficiency of the IRS’s tax enforcement program.”
Current-year funding for the IRS totals $11.5 billion.