Once it was announced that the IRS would receive $80 billion in additional funding as part of the Inflation Reduction Act, the Biden Administration sought to assure regular Americans that these funds would not make them more likely to get audited by the agency.
Treasury Secretary Jannet Yellen said that individuals and small businesses making under $400,000 a year would not see audit rates increase.
A recent White House press release highlighted how much of the funds are “dedicated to closing the tax gap by specifically enforcing tax compliance by the wealthiest tax evaders.”
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However, data from Syracuse University’s Transactional Records Access Clearinghouse (TRAC), a nonpartisan data provider focused on federal government agencies, shows the poorest Americans — primarily those requesting the Earned Income Credit (EIC) — have a higher risk of getting audited by the IRS.
TRAC analyzed 2021 tax returns and found that annual earners of less than $25,000 were five times more likely to get audited than everyone else. They also found that 13% of these returns claiming the EIC were audited, increasing even higher to 13.5% in 2022.
Meanwhile, barely over 1% of millionaires received an IRS audit in 2022.
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According to Taxpayer Advocate, an average individual taxpayer already spends around 13 hours and $240 in out-of-pocket costs to file one annual return. Having to deal with an IRS audit can add even more time and money for taxpayers.
The fear of getting an IRS audit has been a way for private tax prep services to profit further. H&R Block (NYSE:HRB), for example, offers filers an add-on charge called “Peace of Mind,” marketed as a service to provide representation and assistance in the event of an IRS audit.
Some politicians have gone so far as to call for the elimination of the IRS, such as Florida Governor Ron Desantis, who would prefer to implement one flat tax that gives all taxpayers the same rate and does away with the current tax code.
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This article Biden Promised IRS Funding Wouldn’t Increase Audits For Regular Americans As IRS Audits Poorest Americans 5X More Often Than Others originally appeared on Benzinga.com
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Source: finance.yahoo.com