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Navigating the IRS Audit Surge: What High-Net-Worth Individuals and Corporations Must Know for 2024 and Beyond

Understanding the Upcoming IRS Audit Increase – What Wealthy Individuals and Corporations Need to Know

The Internal Revenue Service (IRS) has announced a strategic shift in its audit priorities, aiming to enhance compliance and gather additional revenue. This will likely mark big changes for how the IRS audits wealthy individuals and large corporations.

  1. Increased Focus on High-Income Individuals and Large Entities
    Commissioner Danny Werfel has confirmed that the IRS will intensify audits on distinct taxpayer categories, reinforcing legal compliance and integrity within the tax system. Notably, this does not indicate a surge in audits for middle and lower-income earners, or small businesses.

  2. Audit Rate Changes Projected:

    • Large Corporations: For entities with over $250 million in assets, audit rates are expected to reach 22.6% by the 2026 tax year, a significant rise from 8.8% in 2019.

    • Large Partnerships: Those with assets exceeding $10 million will experience audit rates amplify to 1% from a previous 0.1% in 2019, marking a tenfold increase

    • Wealthy Individuals: Individuals boasting a total positive income above $10 million should prepare for a 50% increase in their audit rates, up to 16.5%.

  3. The IRS’s Strategic Goal & Workforce Expansion
    With this targeted approach, the IRS aspires to reinforce the importance of tax compliance among high-wealth filers and complex organizations.
    To support this initiative, the IRS is expanding its workforce. Although the agency’s staffing had decreased from over 100,000 employees in the mid-1990s to around 73,000 in 2019, recent efforts have boosted the number to approximately 90,000. Future projections aim for 102,500 employees, still under historical highs but sufficient to enhance audit capabilities.

Staying Prepared: With the IRS openly dedicating resources to scrutinize high-earners and large firms more closely, it is imperative for such taxpayers to seek expert guidance. Dallo Law Group recommends reviewing financial and tax arrangements and planning strategically to ensure compliance and readiness for a potential audit.

If you need an in-depth audit risk assessment or are contacted by the IRS regarding an audit, contact Dallo Law Group for personalized assistance suited to this new enforcement landscape.