Are there extra audits on the horizon?

0
300

The Internal Revenue Service’s $80 billion budget increase was the talk of the town earlier this year when the Inflation Reduction Act boosted the agency’s bottom line. Over half of the increased budget was slated for resources to help collect unpaid tax monies. Has the IRS been able to hire though?

It is reported that of 87,000 jobs created by the plumped up budget only 4,000 additional employees have been hired ahead of this upcoming filing season. What does all this mean for your clients’ tax returns?

Most professionals are aware that audit rates have been declining for a number of years. Supposedly, the increased funding was only ever meant to target taxpayers earning over $400,000, but the agency still needs to acquire the resources to boost its compliance arm.

CPA firms all over the country are skeptical as to where these individuals will come from. These jobs require technical skill sets like auditing at a time when the accounting student graduation rate is declining as well as the number of experienced professionals in the field.

To add to the questions for the soon-to-be 2023 filing season, new regulations requiring 1099-K reporting to a much larger number of taxpayers will likely ramp up the workload. Taxpayers who previously did not receive 1099-K for their payments from processors like Venmo, PayPal or eBay, may suddenly find that they have more tax questions this year.

The decline in the accounting workforce, combined with the still-increasing complexity of the tax law changes leaves more questions than answers as to the stability of the upcoming tax season. More taxpayers will need help from experienced professionals, as well as the IRS, but the increased budget alone does not appear to be solving the resource problem.

The new 1099-K rules stand to strike smaller businesses like gig-economy workers in direct conflict with the administration’s intention to aim increased scrutiny at higher-income earners.

Two things you can do in your firm to help your clients is:

  • Make sure all your clients are prepared to report the new 1099-K. Right now they may not even be aware that its coming or that they will need to wait for it in order to prepare their return
  • Enhance your review procedures

Preventing errors even as simple as addresses being transposed can help ensure smooth processing when returns are filed and reduce the need for you or your clients to have to contact the IRS, which is not looking to operate significantly more efficiently than last filing season.

Like what you’re reading?

Subscribe to our FREE newsletter and we’ll deliver content like this directly to your inbox.