IRS to hire 3,700 more tax enforcers, potential focus on earners below $400,000, warns watchdog.

The Internal‌ Revenue Service (IRS)​ is on ⁤a mission to hire over⁢ 3,700 additional tax enforcers as it ramps up its crackdown on higher-earning taxpayers. However, there’s a catch – Americans making less⁢ than ​$400,000 could also get⁢ caught ‍in the dragnet because the agency lacks a clear ⁣definition of “high-income.”

The ⁣IRS recently announced the opening of over 3,700 ‍positions nationwide to assist with “expanded⁣ enforcement ⁤work” targeting complex partnerships, large corporations, ‌and high-income‍ earners. These compliance positions will be ⁢available in more than 250 locations across the ​United States ⁣and are part of a “sweeping, historic” tax enforcement crackdown ⁢that utilizes cutting-edge technology, ‍including‌ artificial intelligence,⁢ to catch tax evaders more effectively.

But here’s the twist ​- the hiring is specifically for higher-graded revenue ⁣agents,‌ and⁢ the IRS is calling on individuals in the financial services industry, such ​as ‌tax accountants, forensic accountants, auditors, and controllers, to ‍apply. ⁣

The IRS⁣ has received a⁢ significant boost‍ in funding, with⁣ $60 billion ​in new funding recently mandated ⁣by Congress. This influx of ‍cash has already led to a substantial increase ​in hiring, with ‌reports indicating a 13 percent rise in staff over the‍ past year, bringing the total number ‍of IRS employees ⁣to nearly 90,000 – the highest in a decade. ⁣However, while⁣ the‌ previous wave of ⁤hiring‍ focused on​ taxpayer service positions, this new hiring thrust aims to strengthen the IRS’s enforcement capabilities.

IRS Commissioner Danny Werfel stated that this next wave of hiring will help the agency add key​ talent, such as tax accountants, to reverse the decline in audits for‌ the wealthy, as well as complex‍ partnerships and corporations. However, Mr. Werfel’s assurance not to target Americans earning under $400,000‌ is met with‌ skepticism. A recent watchdog⁢ report from the⁣ Treasury‌ Inspector General‌ for Tax Administration (TIGTA) questions the IRS’s ability to fulfill⁢ this pledge due ‌to the lack of a clear definition of “high-income” or the use of outdated tax examination activity codes that set the threshold for high⁣ earners at $200,000.

The TIGTA report criticizes the IRS for not having a unified or updated definition of “high-income” earners, despite the watchdog’s previous recommendation⁣ to develop a better definition. The report ⁢highlights that the IRS uses different definitions of “high-income” depending on the context, leading to inconsistencies across various IRS‌ programs. The watchdog faults the IRS for not reevaluating income thresholds for high-income and high-wealth strategies, even though it recommended doing so in 2015.

Furthermore, the IRS continues to rely on old tax examination activity⁤ codes established ​in 1976, which set a $200,000 threshold for high-income returns. ⁢The watchdog argues that this threshold‍ is ‌no longer reasonable for high earners due to inflation since 2005. The IRS’s use of ⁢these outdated codes and the lack of a clear definition of ​”high-income”‌ raise ⁣concerns⁤ about the agency’s ability to effectively target tax evaders and fulfill its pledge not to audit Americans earning⁢ less ⁣than $400,000.

The TIGTA ⁤recommends that the IRS establish a definition for high-income taxpayers and update its examination activity codes​ accordingly. The⁣ IRS disagrees with ‌this recommendation, stating that a static definition would hinder‍ its ‌ability to address emerging​ issues and trends. However, the watchdog argues that income thresholds should‍ be adjusted based on economic⁢ and complexity factors to avoid inefficient examinations​ and ensure the IRS’s effectiveness in closing the tax gap.

The‍ IRS partially agrees ⁢with the watchdog’s recommendation to⁢ refine its examination activity but falls ⁣short of satisfying the intent of‌ the ​recommendation. The watchdog insists that additional⁢ actions are ⁢needed, including the establishment of examination activity codes for different income levels. The IRS’s response to this rejection‌ is included in the report.

In summary, the IRS’s hiring ‍spree aims to bolster its enforcement efforts against higher-earning taxpayers. However, the ⁤lack of a clear definition of “high-income” and ⁤the use of⁤ outdated tax examination‍ activity codes raise concerns ⁤about the‌ agency’s ability to target tax ‌evaders effectively and avoid⁢ auditing Americans earning ⁣less than $400,000. The ​watchdog’s⁣ recommendations to establish⁣ a clear⁣ definition⁢ and update examination activity codes are crucial for the‌ IRS to fulfill its pledge and close​ the tax gap.

How does the‍ use⁢ of outdated tax examination activity codes affect the accuracy of income thresholds ‌for high earners?

⁢For not keeping up with the changing economic landscape.

The lack of ⁤a clear definition of “high-income” is significant because it means that even individuals who make less ⁤than $400,000 could ⁢potentially be caught in the IRS’s crackdown. Without a set income threshold, it⁢ becomes subjective and arbitrary to determine who qualifies ​as a high-income earner. This lack of clarity raises ⁣concerns about fairness and ​whether the ‍IRS has ⁤the authority to target individuals based on its‍ own interpretation ​of what constitutes⁣ high income.

Furthermore, the report ⁤highlights the use of outdated tax examination activity codes that set the threshold for high earners at ​$200,000. In​ today’s economy, where the cost of living‌ and inflation have increased significantly, it⁢ is essential to reevaluate income​ thresholds regularly to ensure ‍they remain accurate and reflective of the current financial landscape.

The IRS’s inability to ⁢define “high-income” accurately‌ has led to inconsistencies across its various‍ programs. This lack of​ cohesion‌ undermines the effectiveness of the agency’s enforcement efforts and raises concerns ​about its ability to target⁣ tax evaders effectively. If the IRS cannot clearly ​identify who falls under the category of high-income earners, its enforcement actions become arbitrary and open to potential ⁢abuses of power.

While the IRS’s intention to hire additional tax enforcers ⁣to crack ⁤down⁤ on higher-earning taxpayers is understandable, it is ‍imperative that the agency addresses the ‌issue of a clear definition⁤ of “high-income.” Without a unified and updated definition, there is a risk of unfairly ​targeting individuals who‍ do not meet ⁣the traditional⁤ definition of high income but may still be subject to scrutiny and‍ enforcement actions.

Moving forward, the IRS needs to establish a clear⁣ definition of “high-income” that is reflective of the current ⁢economic⁤ landscape. This⁢ definition should take into ⁣account factors ‍such as cost of living, inflation, and regional disparities. By establishing a ⁢transparent⁤ and accurate definition, the IRS can ensure its enforcement efforts are fair, effective, and unbiased.

In conclusion, while ​the IRS’s mission to hire additional tax enforcers⁢ to crack down ⁣on higher-earning taxpayers is commendable, there is a catch. The lack of a⁣ clear definition of ⁣”high-income” raises concerns about potential targeting ‍of individuals who do not meet the traditional⁢ definition but ‌could still get caught in the dragnet. It is crucial that ⁣the IRS addresses this issue and establishes a unified and updated definition to ensure fairness and effectiveness​ in ⁤its enforcement efforts.

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