May 4, 2021
President Biden proposes increased IRS budget to improve tax compliance
On April 28, 2021, the Treasury Department issued a press release detailing the government's plan to increase resources to the IRS in order to improve tax compliance.
According to the release, President Biden proposes to direct $80 billion to the IRS over the next 10 years to (1) improve technology; (2) increase the hiring and training of auditors to focus on complex investigations of large corporations, partnerships and global high-wealth individuals, and (3) increase enforcement against high-income individuals.
"The IRS requires more resources to conduct investigations into underreported income and to pursue high-income taxpayers who evade their tax liability through complex schemes," according to the release.
Treasury expects these changes to result in $700 billion in tax revenue over the next 10 years.
Treasury also said it wants the IRS to implement a mechanism for cross-checking the accuracy of tax filings from "opaque sources," such as partnerships and proprietorships. Treasury said it will leverage "the information that financial institutions already know about account holders, simply requiring that they add to their regular, annual reports information about aggregate account outflows and inflows."
While implementation of all facets of the plan will take time, corporations, high-wealth individuals and partnerships may want to prepare for the possibility of increased audits. The proposed information reporting would provide IRS with significant additional data points that will enable IRS to more accurately target potential underreporting and other noncompliance.