The U.S. Is Seeking to Raise an Additional $700 Billion Through IRS Audits
With Republicans and Democrats in a stalemate regarding potential income tax increases, the Biden administration has put forth a different proposal: Rather than asking law-abiding taxpayers to pay more, the IRS should do more to make non-law-abiding taxpayers pay what they owe. As Washington D.C. tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, explains, this could lead to a significant increase in the number of IRS audits over the next 10 years.
Risk of IRS Audits May Increase in 2021
According to the Associated Press, the Biden administration is targeting $700 billion in additional revenue over the next decade by reducing the “tax gap”—the difference between what U.S. taxpayers owe and what they pay. IRS Commissioner Charles Rettig recently has stated that the annual tax gap could be as high as $1 trillion. With the average taxpayer owing around $5,000 annually, it will take a lot of IRS audits to close the tax gap by any measurable degree.
Of course, the IRS won’t just be focusing on “average” taxpayers. In fact, it has already identified a number of enforcement priorities—including priorities focused on high-income and high-risk taxpayers (those who are most likely not to pay tax). By focusing on gig economy workers, small businesses, cryptocurrency investors, and high-income taxpayers that report relatively little taxable income, the IRS can maximize the efficacy of its enhanced auditing efforts.
Common Triggers for IRS Audits
But, while the IRS may emphasize enforcement for certain types of taxpayers, it will not be focusing its efforts on these taxpayers exclusively. There are numerous issues that can trigger IRS audits. Some common examples of issues that can lead to audits include:
- Failure to report taxable income
- Math errors
- Claiming excessive deductions
- Reporting excessive losses
- Inconsistencies between tax filings
- “Quiet disclosures” used to correct past filing mistakes
If the IRS enhances its auditing efforts in 2021 and beyond as proposed, these types of issues will receive even greater scrutiny, and even more taxpayers will find themselves facing unwanted scrutiny. Both intentional and unintentional filing errors can result in additional liability, while intentional (or “willful”) mistakes have the potential to lead to criminal prosecution for tax evasion or tax fraud.
What Should You Do if You Have Concerns about an IRS Audit?
If you are facing an IRS audit, or if you have concerns about facing an IRS audit, what should you do? Due to the risks involved, it is imperative that you engage an experienced Washington D.C. tax attorney to represent you. An experienced tax attorney will be able to assess your risks, explore your options, and effectively deal with the IRS on your behalf. Even if you cannot avoid liability entirely, an experienced tax attorney may still be able to help significantly reduce your liability and protect you against criminal prosecution.
Schedule a Free Consultation with a Washington D.C. Tax Attorney
For more information about protecting yourself against an IRS audit, schedule a confidential consultation at Thorn Law Group. To speak with Washington D.C. tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group personally, call 202-349-4033, email firstname.lastname@example.org or contact us online now.