After the news broke that the Inflation Reduction Act gives the IRS an extra $80 billion in funding, the Biden White House attempted to persuade taxpayers that these funds would not raise the possibility of an audit by the agency.
Additionally, Treasury Sec. Janet Yellen has already stated that audit charges for individuals and small enterprises earning less than $400,000 annually will not increase.
Furthermore, a recent White House press release states that a great portion of the funds “meant to reducing the tax gap by explicitly pursuing tax compliance by the richest tax evaders.”
Yahoo News reports that the poorest people, particularly those who apply for the Earned Income Credit, have a greater chance of being audited by the IRS, based on data from Syracuse University’s Transactional Records Access Clearinghouse (TRAC).
TRAC’s research on 2021 tax returns revealed that taxpayers with yearly earnings under $25,000 were five times more likely to be audited than other taxpayers. They also found that around 13% of these returns indicated that the EIC recipients had undergone an audit, and that percentage would increase to 13.5% in 2022.
Less than 1% of millionaires had an IRS audit in 2022.
According to Joanna Ain, associate director of policy at the nationwide charity Prosperity Now, “families with lower incomes are very straightforward and affordable to audit when compared to more rich people and corporations.” “It must be a tremendous and frightening burden for lower-income families to receive these IRS notices and go through that procedure.”
According to the Taxpayer Advocate, the average person already has to spend around 13 hours and about $240 in costs to submit a single yearly return. Taxpayers may require a significant increase in time and resources to handle an IRS audit.
By capitalizing on people’s anxiety over an IRS audit, private firms have been able to raise their earnings. For instance, H&R Block charges filers another fee known as “Peace of Mind,” a service that gives support and legal advice during an IRS audit.
Politicians who have even called for the IRS’s abolition include Florida Republican Governor Ron DeSantis (R-Fla.). DeSantis claims that in its place, he would like to implement a single flat tax that would do away with the current tax structure and charge every taxpayer the same amount.
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