August 12, 2022
The Inflation Reduction Act is now on its way to President Biden’s desk to become a law. But so many of you are really concerned about the money that’s going to the IRS.
I’m sure you’ve heard all over the internet this bill gives the IRS $80 billion to hire 87,000 agents so they can audit the middle class and small businesses.
Here are the facts and a big piece that you may not know.
I’ve been reporting for more than a year that the IRS’s budget has been gutted consistently over the last decade and their staffing is so low it has caused lots of problems – like delayed tax returns and refunds. We all remember that drama right? That’s because the IRS didn’t have enough people to handle the volume of returns and they have a lot of outdated equipment that can’t keep up. And because of the budget cuts they haven’t had the money to fix those things.
So now that you know the IRS’s budget has been absolutely gutted over the last decade, that will give you some context to understand why congress just gave the IRS $80 billion in funding over the next several years.
The other fact you need to know is — absolutely nowhere in the bill does it say the IRS must hire 87,000 auditors. What the bill says is of the $80 billion, about $45 billion will go towards expenses for tax enforcement services and that money is spread out over the next nine years (September 2031). That money can be used to hire more employees not just agents who handle audits. In fact, the department of treasury says the claim of 87,000 new agents is false.
Now – to the other claim that the IRS is going to start auditing the middle class and small businesses as a result of this law. The IRS Commissioner wrote this letter to the senate on August 4th. In the letter he said the money will help the IRS go after “large corporate and global high-net-worth taxpayers” “pass through entities” and “multinational taxpayers with international tax issues” where sophisticated, specialized IRS teams are needed to dissect the complex web of how these companies an high net worth people structure where their money goes. He goes on to say,
“These resources are absolutely not about increasing audit scrutiny on small businesses or middle-income Americans. As we’ve been planning, our investment of these enforcement resources is designed around the department of the treasury’s directive that audit rates will not rise relative to recent years for households making under $400,000.”
The reality of tax audits as they stand today – the middle class and low income Americans get audited at a much higher rate proportionally than rich people and big companies. Why? Because rich people and big companies have lots of lawyers and accountants who can help them get “creative” with what they report to the IRS. I told you in this video back in June, that the IRS reported their “resource limitations” have prevented them from going after high-income earners who make more than 5-million dollars a year in like they did between 2010 and 2017.
So what will the money be spent on? The commissioner says yes, they will hire more employees, but it will also be spent on IT systems that will upgrade that old outdated equipment I told you about.
Read the August 4 letter from the IRS Commissioner here.
