Although the 2022 Inflation Reduction Act (IRA) was touted as being a bill designed to reduce inflation, it carries with it considerably more baggage. In particular, the expansion of the IRS and it tax enforcement arm will result in more taxpayers seeking IRS audit & appeals help as it comes into effect starting next year.
Understanding the expansion of the IRS and how it affects you will assist in reducing the chances that you will be audited. But keep in mind that this expansion will take years to complete. This means that over the next few years, your chances of being audited will rise as more revenue agents are being hired.
Call us today for a case evaluation 1-877-788-2937.
IRS Expansion under 2022 Inflation Reduction Act (IRA)
There is little doubt that arguably the most controversial aspect of the Inflation Reduction Act of 2022 is the expansion of the IRS. Traditionally, to raise revenues taxes are either raised to directly collect more money or lowered to encourage greater growth which in turn spurs additional revenues. In this case, it is the enforcement of current tax laws that is the focal point.
Improving enforcement of tax laws is easier, although it will result in more people seeking IRS audit & appeals help. This is because the economic cost of enforcing existing laws is arguably cheaper than creating new ones. Especially when considering the new laws that have been proposed over the past few years.
However, the cost of greater enforcement does come with a price tag. And the price for this expansion has been estimated at roughly $80 billion over the next decade. This means more IRS agents, more attempts to squeeze taxpayers on every filing, and more IRS audit & appeals help that comes from tax representation professionals.
Arguably, it would be more effective to simplify the tax code mostly by reducing loopholes that in turn generates more revenues. And it’s not like the federal government is short of revenues. 2020 saw the largest collection of revenues in the history of the United States. For the first time, the amount exceeded $4 trillion, although that regressed somewhat in 2021.
For the taxpayer, the result of the passage of the Inflation Reduction Act means relatively few changes to the tax code, but greater diligence on the IRS to collect the money. But what exactly is in the package?
Call us today for a case evaluation 1-877-788-2937.
How the IRS Expansion Works in the Inflation Reduction Act?
The boost to the IRS budget of $80 billion over the next 10 years is broken down into four different categories that work together to increase compliance. The four categories are as follows with the estimated amount of budget increase included.
- Enforcement: $45.6 billion
- Operations & Support: $25.3 billion
- Modernization of Business System: $4.8 billion
- Services to Taxpayers: +$3.2 billion
- Miscellaneous: Under $1 billion
As you can see, more taxpayers will need IRS audit & appeals representation help with this expansion. With more than half going towards enforcement, the goal will be to conduct more audits and pursue what is seen as tax violations or oversights on existing returns.
In relative terms, the increase in the modernization efforts of the IRS is second only to the increases in enforcement. But all the new categories listed are designed to have more agents see more tax returns and create more audit situations to collect even more revenue.
The modernization efforts focus on increasing callback technology and capacity to bolster direct customer service. This does not include current systems that are being used, but instead creates a new one designed to bolster the active systems that the IRS uses. In essence, this means that you will get more contacts from the IRS, particularly on the phone which means that you may want to see IRS audit & appeals representation help if needed.
The actual total is $79.6 billion, but the $80 billion figure is not far off. Especially when you consider that such numbers usually go up over the years as more revenues are poured into fulfilling the bill requirements. This will certainly spark more IRS audit & appeals help for taxpayers across the country.
What It Means to You 2022 Inflation Reduction Act (IRA)
The bottom line is that over time you will be subject to a higher probability of audits conducted by the IRS. Such audits may occur for several different reasons, but the most likely event will be based on misinterpreting deductions or missing areas where you should have paid.
In the past, if the issues were small in nature, they might’ve been overlooked or simply not worth pursuing. As more agents are added to the IRS, there will be greater pressure to pursue all collections no matter their size.
Keep in mind that this will take time. Currently, the IRS is still operating under the COVID pandemic conditions which have kept many IRS revenue agents operating in their homes. Bringing them back into the office and training more agents will take a considerable amount of time.
Plus, a considerable amount of the money being spent will go towards modernizing the IRS itself. This means updating computers, installing new programs, artificial intelligence, and essentially taking the IRS into a new direction of tax collection.
In addition, there will be taxpayer services that will be funded by the IRS which includes pre-filing assistance, filing and accounting services, education, and other services. With all that assistance, you will still need IRS audit & appeals help if it should be needed.
Call us today for a case evaluation 1-877-788-2937.
FAQ Audits and the 2022 Inflation Reduction Act (IRA)
With this new legislation comes many questions from taxpayers. The most important is how people will be affected by the changes and what they can expect from the IRS.
Will I become more likely to be audited?
The answer is probably yes. This is because it is possible that more automatic or random audits will be issued as more IRS revenue agents are available for enforcement. Every year, a small percentage of tax returns are audited regardless of whether anything unusual was detected. In such cases, the IRS will probably not contact you if nothing was found. But such random audits can generate more calls and contacts when something is found. That is why you need IRS audit & appeals help from your trusted tax representation professionals.
How many IRS agents will be added?
Despite media reports of 87,000 new IRS agents, the exact number is not known. The 87,000 represents the total number of all new hires that can be recruited under the bill over the next 10 years. However, that number will likely be lower for several reasons. But the increase will happen over time and that means with more revenue agents at their disposal, more audits will be conducted.
For you, this means that it becomes more likely to seek IRS audit & appeals help if selected for examination.
What does the expansion of IRS enforcement mean in the bill?
Of the $45.6 billion allocated to enforcement, it will be delegated to the following areas.
- Determination & Collection of Taxes Owed
- Legal & Litigation Support
- Conduct Criminal Investigations
- Digital Asset Monitoring & Compliance
- Enforce Criminal Statutes
Basically, this is an expansion of what the IRS can do. In the past, the limitation has been the budget in identifying violations and applying audits and enforcement. With the expansion of the IRS, this means it is more likely that all violations will be pursued.
Does this mean I will now get audited? 2022 Inflation Reduction Act (IRA)
Not necessarily. Audits are conducted for a reason and besides the random audits that are created, the IRS does not pursue those who have correctly filled out their tax forms and are compliant with the current tax codes and standards
What this does mean is that the likelihood of you getting audited has increased if you have made a mistake on your tax form. Keep in mind that many issues the IRS cites will normally be sent in a letter detailing what they have found. Depending on the issue, it may mean a small payment or simply clearing up a misunderstanding.
IRS audit & appeals help may be limited in such circumstances, especially if you have tax professionals that do the work in filling out your tax forms. In such cases, it is the professionals who back up their work, so they would be the ones to turn to in case the IRS has cited issues with your tax returns.
If you need IRS audit & appeals help, seek out the tax professionals that can provide you with complete assistance. As the new regulations, modernization, and budget increases occur, you are now more subject to an audit even if your tax form is properly filled out. By having the right tax professionals by your side, it can take the stress away from being under an audit. Contact us today and find out more about how you can get the help you need when facing an IRS audit.
Call us today for a case evaluation 1-877-788-2937.