More IRS agents?

There are a few tax items in the Inflation Reduction Act making its way through Congress right now. The one that I’m getting asked about is increased IRS enforcement and should taxpayers be concerned.

Some taxpayers should absolutely be concerned. There’s a lot of low-hanging fruit out there for the IRS to go after. Businesses claiming made-up deductions. Individuals entering into abusive tax shelters. Even some “tax advisors” should be concerned. For example, so-called “ghost preparers” who fly under the IRS’ radar by not listing their contact details on tax returns they prepared and not adhering to IRS standards - yeah, go find those folks and put them in jail.

Most taxpayers, though, aren’t doing anything illegal or even in a gray area. Most taxpayers have fairly straightforward tax situations that don’t really have ROOM to be skirting the law. If all you have to reports is a W2 and a few itemized deductions, this is about as vanilla a tax filing as you can get. And this is where most folks are. I don’t see that the majority of US taxpayers should be concerned by an increase in IRS exams or other enforcement.

What about MY clients whose tax situations tend to be anything BUT vanilla? Yes, I would expect my own client base could see a rise in IRS attention under this bill. I do NOT expect, though, anything truly negative from it. In fact, an IRS that more readily enforces tax law will help me be more clear to clients where gray areas actually are.

With that said, while I think the IRS could definitely stand to step up its enforcement game and while I don’t think the average taxpayer needs to be concerned right now, I would much prefer to see it all play out in this order:

1. Congress stops the decades-long tradition of cobbling together confusing & complicated tax law and then underfunding the IRS whose task it is to enforce such law. There’s no need for our country’s Accounts Receivable department to be a political talking point.

2. IRS is provided sufficient $$ and leadership to bring their technologies into this century. I’m not a fan of the IRS, but I will absolutely acknowledge they are working without the guidance and resources to do a good job for all taxpayers.

3. And THEN IRS ramps up enforcement. But I will also acknowledge that more time & money devoted now to some of the worst offenders that clog up the works will free up resources for desperately needed customer service.

Assuming this bill passes, we’ll see how successful the IRS is at hiring all these folks and training them up…