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IRS Audit Rates Tripling: Wealthy Individuals, Large Corporations Targeted

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Clear Facts

  • The Internal Revenue Service (IRS) has warned that audit rates are set to triple, marking a significant escalation in its scrutiny of tax filings.
  • The IRS’ Strategic Operating Plan particularly targets the wealthiest taxpayers, large corporations, and large, complex partnerships for audit.
  • For individuals with an annual income less than $400,000, their filings will largely remain unaffected by this surge in audits.

With the 2023 tax year having drawn to a close, taxpayers are being notified that audit rates are likely to triple, a development that could significantly increase stress levels.

An IRS audit is an examination or review of an individual or business’s information and accounts to ensure that the tax laws are being followed correctly and the reported tax amount is accurate. These audits can occur at random, be associated with another audited file, or be initiated due to suspected fraudulent activity.

The IRS intends to narrow the ‘tax gap’—the difference between what it should be receiving in taxes and what it actually receives—through these audits. On May 2, the IRS publicized its plans for additional funding and outlined its Strategic Operating Plan. IRS Commissioner, Danny Werfel, emphasized that tripling audit rates was a key part of this plan, aimed at bolstering the U.S. Treasury’s funds.

However, not everyone will be affected equally by the proposed audit surge. The IRS intends to concentrate on “the wealthiest taxpayers, large corporations and large, complex partnerships by sizable percentages.”

Individuals with an annual income less than $400,000 will see little change due to the audit surge. Werfel reassured that “there is no new wave of audits coming for middle- and low-income [individuals], coming from mom and pops. That’s not in our plans.”

Conversely, the wealthy are expected to face the majority of the IRS’ increased scrutiny. Those with annual incomes over $10 million will have a 16.5 percent chance of being audited in the tax year 2026.

In addition to high-income individuals, the IRS will be increasing its oversight of large corporations, especially those with assets over $250 million. These corporations should expect the IRS to triple its audit rates. Similarly, large, complex partnerships with assets over $10 million are forecast to see their audit rates increase from 0.1 percent to 1 percent in the tax year 2026.

Werfel explains that this audit surge is strategic. The IRS is reallocating resources to focus on high-profile taxpayers and businesses suspected of tax evasion. “It sets an important tone and message for complex filers, high-wealth filers, that this is our focus area,” Werfel stated.

While we strive to provide the most recent financial information and insights, our content is not a substitute for professional advice. Always consult your financial advisor directly regarding your financial decisions.

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