Enforcement Troubles

It is not unreasonable that the One Big, Beautiful Bill dominated people’s thoughts about tax changes and how they would affect their personal situations once President Trump came into office for his second term. It promised to have meaningful content and this proved true once it was passed. There are definite changes in it that will affect people’s tax picture. At the same time, however, there are some other changes going on in the tax world that should be noted.

Passed during the Biden administration, the Inflation Reduction Act of 2022 provided almost $80 billion of additional funding to the IRS over 10 years. That almost immediately became something that could be bargained with when funding was needed elsewhere and with the Republicans now holding fuller power that total has been more than halved.

Part of the plan for that initial large outlay to the agency was to be allocated for enforcement activities. The budgetary thinking was that if funds are invested in collecting money that taxpayers owe the government, it is something that will essentially pay for itself. More than half the additional money going to the agency was to go there, but now the amount set for enforcement is less than $4 billion.

With a strategy of using the enforcement funds to pay for themselves, it shouldn’t be surprising that much of the plan was to pursue high-income taxpayers who owed money. After all, there’s a big difference between clawing back $10 million owed over $1,000.

And let’s also not forget that along with many other federal agencies, the IRS has seen its staff numbers decrease and there isn’t any indication that this will change soon. So, with less enforcement money and less people to do the enforcement … well, the endpoint becomes clear.

Even with this inevitable answer, I never want to tell anyone that they shouldn’t worry about a tax audit. It is always a possibility and “it probably won’t matter” isn’t a good reason to fudge your tax return. As always, we instead believe in submitting the tax return that is most advantageous to you within the current rules.

While also acknowledging that, yes, the chances of an audit do appear to be lessening. 

Warmly,

Josh Bousquet
Connect to Us ~ Facebook ~ X