January 1, IRS Triples Audits, Wealthiest Taxpayers Feel the Heat: Are You Next?

The 2023 tax year has come to an end, and taxpayers are eagerly awaiting their refunds. However, the IRS has issued a warning that audit rates are set to triple in the coming years.

“An IRS audit is an examination or review of your information and accounts to ensure you’re reporting things correctly, following the tax laws, and that your reported tax amount is correct,” explains a financial expert.

Tax audits can occur at random, because your return is linked to another audited file, or due to shady activity. The IRS conducts tax audits to minimize the ‘tax gap,’ or the difference between what the IRS is owed and what the IRS actually receives.

On May 2, the IRS unveiled its plans to bolster funding and explained how the agency aims to put its Strategic Operating Plan into motion. IRS commissioner Danny Werfel said a key part of this is to increase audit rates and, consequently, cushion the U.S. Treasury’s pockets.

The crackdown will be targeting “the wealthiest taxpayers, large corporations and large, complex partnerships by sizable percentages,” according to the IRS.

Taxpayers can expect to see an audit surge over the next three tax years. However, individuals with annual income less than $400,000 will mostly remain unaffected.

“There is no new wave of audits coming from middle- and low-income [individuals], coming from mom and pops. That’s not in our plans,” Werfel told reporters.

Wealthy individuals who make more than $10 million annually will have a 16.5 percent chance of being audited in tax year 2026. The IRS is also tripling audit rates on large corporations with assets totaling over $250 million. Large, complex partnerships with assets over $10 million will see an audit hike of 0.1 percent to 1 percent in tax year 2026.

Werfel explained that the surge is strategic, with the IRS refocusing its time and resources on cracking down on high-profile taxpayers and businesses who try to cheat the system.

“It sets an important tone and message for complex filers, high-wealth filers, that this is our focus area,” Werfel stated.

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