The Inflation Reduction Act — signed into law by President Joe Biden on Aug. 16 — injects the Internal Revenue Service with $80 billion in new funds, and the big question now is how the agency will use it.
Republican lawmakers argue the funds will supercharge the IRS to hire 87,000 new agents to go after middle-class taxpayers. But President Joe Biden and top democrats maintain that the beefed up IRS will only institute more audits on those earning more than $400,000 per year.
Industry officials reached by ThinkAdvisor say that an onslaught of new audits will not be immediate.
Under the bill, the IRS gets a budget boost of $80 billion over 10 years — a big jump from the annual IRS budget of $12.6 billion.
On Wednesday, Treasury Secretary Janet Yellen set a six-month timeframe for the IRS to compile a plan on how it will deploy an influx of $80 billion in enforcement funding over the next decade.
'Slow Build'
The budget increase will allow the IRS to hire more agents, "arming them with new technology focused on increasing the audit rate substantially on those earning more than $400,000," Jeff Bush of The Washington Update told ThinkAdvisor in a recent email.
Biden and Yellen "have committed to not impacting joint filers earning less than $400,000 with higher audit rates," Bush said Thursday.
"It will also take the IRS several years to hire, onboard and train new employees and deploy new technology. I don't anticipate a large increase in total audit rates in tax year 2022," Bush continued. "It will be a slow build as new staff and technology come on line."
Republicans, Bush continued, "are suggesting the audits will reach deeply into the middle class, breaking Biden's promise of not raising taxes on those under $400,000. Being outraged by this is to assume that someone underreporting their income at $399,999 is somehow less egregious than someone inflating deductions earning $400,001."
