IRS pledges not to use additional funds to audit low-income taxpayers

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Internal Revenue Service Commissioner Chuck Rettig vows not to use the nearly $80 billion his agency will receive over the next 10 years to increase audits of small businesses or taxpayers who earn less than $400,000 dollars.

The Cut Inflation Act, which President Biden signed into law on Tuesday, allocates $79.6 billion to the IRS over the next 10 years. However, despite claims that the money will be used to hire 87,000 new IRS agents to audit taxpayers, Rettig pledges to spend the money on other priorities.

“These funds will help us in many areas, including adding significant resources to our tax enforcement, taxpayer service and technology,” he said. “The law also includes a wide range of tax law changes that we will need to implement very quickly. This proposal creates opportunities for the national tax system in areas where we face challenges, helping us with the necessary resources. to deal with large corporations and high-net-worth taxpayers as well as flow-through entities and multinational taxpayers with international tax issues.To ensure the fairness of the system, we need sophisticated and specialized teams in place , capable of analyzing complex structures and identifying cases of non-compliance.”

He insisted the money would not be used to audit low-income taxpayers. “These resources are not intended to increase audit control over small businesses or middle- and low-income Americans,” Rettig said. “As we anticipated, our investment in these enforcement resources is designed around the Treasury Department’s directive that audit rates will not increase from past years for households earning less than $400,000. dollars.”

He noted that more resources would be invested in hiring, training and IT systems that will allow the agency to better serve all taxpayers, including small businesses and those seeking help with their taxes. , and it will help the agency continue its efforts to help people who are more comfortable with a language other than English understand and meet their tax obligations.

On Wednesday, the IRS made available the instructions for Form 8821, Tax Information Authorization Form, in Traditional Chinese. The agency also updated its priority orientation planwith plans to update its regulations and guidelines to reflect legislative changes, including pre-Inflation Reduction Act legislation.

There are currently many other priorities for the IRS besides increasing tax audits. “They need to recruit more officers, but they also need to put them in other places,” said Todd Simmens, technical manager for tax policy and legislation at BDO USA. “They have to get people to process returns, answer phone calls, a lot of those things that just aren’t happening right now.”

Treasury Secretary Janet Yellen on Wednesday sent a memo to Rettig giving her six months to develop a plan for how the agency will use the extra funding (see the story). However, Rettig’s term is due to end in November and it is not yet clear who will succeed him.

Rettig indicated on Tuesday that any changes would not happen right away. “Given the scope of the bill, keep in mind that these changes will not be immediate,” he said. “This is a 10-year plan, and it will take time to put these arrangements in place. Make no mistake, we have a lot of hard work ahead of us to meet the high expectations that this historic funding will provide. But I have great confidence that IRS employees are up to the task – and that they will do it for the nation as they have done countless times before in our agency’s history.”

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