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IRS says its number of audits is about to surge. Here’s who the agency is targeting.
The IRS says it is about to ramp up audits as it cracks down on tax cheats and seeks to deliver more revenue into the U.S. Treasury’s coffers. But not every group of taxpayers will face more scrutiny, according to IRS commissioner Danny Werfel.
The IRS has been bolstered by $80 billion in new funding directed by the Inflation Reduction Act (IRA), which was signed into law in 2022 by President Joe Biden. The idea behind the new funding was to help revive an agency whose ranks have been depleted over the years, leading to customer service snarls, processing delays and a falloff in audit rates.
On Thursday, the IRS outlined its plans for the funding, as well as its efforts so far to burnish the agency’s customer service operations after some taxpayers encountered months-long delays during the pandemic. The IRA money has helped the IRS answer more taxpayer calls during the tax season that just ended on April 15, as well as beef up its enforcement, which led to the collection of $520 million from wealthy taxpayers who hadn’t filed their taxes or still owed money, it said.
“The changes outlined in this report are a stark contrast to the years of underfunding” that led to a deterioration in the agency’s services, Werfel said on a conference call with reporters.
Werfel noted that the IRS’ strategic plan over the next three tax years include a sharp increase in audits, although the agency reiterated it won’t boost its enforcement for people who earn less than $400,000 annually — which covers the bulk of U.S. taxpayers.
Here’s who will face an increase in audits
At the same time, the IRS is increasing its audit efforts, with Werfel noting on Thursday that the agency will focus on wealthy individuals and large corporations:
- The IRS plans to triple the audit rates on large corporations with assets of more than $250 million. Audit rates for these companies will rise to 22.6% in tax year 2026 from 8.8% in 2019.
- Large partnerships with assets of more than $10 million will see their audit rates increase 10-fold, rising to 1% in tax year 2026 from 0.1% in 2019.
- Wealthy individuals with total positive income of more than $10 million will see their audit rates rise 50% to 16.5% from 11% in 2019.
“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 said.
But by focusing on big corporations, complicated partnerships and wealthy people who earn over $10 million year, the IRS wants to send a signal, he noted.
“It sets an important tone and message for complex filers, high-wealth filers, that this is our focus area,” he said.
The myth of 87,000 armed IRS agents
The agency also outlined its efforts to bolster hiring, thanks to the new IRA money. In the mid-1990s, the IRS employed more than 100,000 people, but its workforce had dwindled to about 73,000 workers in 2019 due to a wave of retirements and prior funding cuts.
Werfel said the agency has recently boosted its workforce to about 90,000 full-time equivalent employees, and that it plans to expand to about 102,500 workers over the next few years.
“That number won’t even be a record high for the IRS workforce; it’s well below the numbers from the 1980s and early 1990s,” Werfel noted.
He added that the hiring data should dissolve what he called “any lingering myths about a supersized IRS.” After the IRA passed, some Republican lawmakers warned in 2022 that the agency would use the money to hire “87,000 new IRS agents to audit Walmart shoppers.”
“This should put to rest any misconception about us bringing on 87,000 agents,” Werfel noted, adding that many of the new hires are replacing retiring employees.
Floodwaters pushed by the remnants of Hurricane Helene left North Carolina’s largest mountain city largely cut off Saturday by damaged roads and a lack of power and cellphone service, part of a swath of destruction across southern Appalachia that left an unknown number dead and countless worried relatives unable to reach loved ones.
In North Carolina alone, more than 400 roads remained closed on Saturday as floodwaters began to recede and reveal the extent of damage. North Carolina Gov. Roy Cooper said that supplies were being airlifted to that part of the state. Cooper said two people died in his state, Helene killed at least 52 people across multiple states.
Among those rescued from rising waters was nurse Janetta Barfield, whose car was swamped on Friday morning as she left an overnight shift at Asheville’s Mission Hospital. She said she watched a car in front of her drive through standing water and thought it was safe to proceed. But her car stalled, and within minutes water had filled her front seat up to her chest. A nearby police officer who saw her car stall helped her to safety.
“It was unbelievable how fast that creek got just in like five minutes,” Barfield said.
Erik Verduzco / AP
Early on Saturday morning, many gas stations were closed because they didn’t have electricity, and the few that were open had hourlong lines wrapped around the block. The hub of tourism and arts, home to about 94,000 people, was unusually still after floodwaters swamped neighborhoods known for drawing visitors including Biltmore Village and the River Arts District, which is home to numerous galleries, shops and breweries.
More than 700,000 power customers were without power across North Carolina, including 160,000 in Buncombe County. Interstate 40 and I-26 were impassible in multiple locations, and a state transportation department map showed that most routes into Asheville and across much of the mountains were snarled. North Carolina’s Department of Transportation posted on social media on Saturday afternoon that “all roads in Western North Carolina should be considered closed.”
In Asheville, there was no cellular service and no timeline for when it would be restored.
“We have had some loss of life,” County Emergency Services Director Van Taylor Jones told reporters. However, he said they were not ready to report any specifics. Officials have been hindered in contacting next of kin by the communications outages. Asheville police instituted a curfew from 7:30 p.m. Friday to 7:30 a.m. Saturday.
“The curfew is to ensure the public’s safety and will be in effect until further notice,” police said.
Asheville transit services were also suspended, police said. The city advised residents to boil “all water used for human consumption,” as there was at least one significant water line break during the storm. Many residents might not be getting water or reduced or no pressure water.
Jones said the area experienced a cascade of emergencies that included heavy rain, high winds and mudslides. Officials said they tried to prepare for the storm but its magnitude was beyond what they could have imagined.
“It’s not that we (were) not prepared, but this is going to another level,” Sheriff Quentin Miller said. “To say this caught us off-guard would be an understatement.”
Erik Verduzco / AP
Atlanta resident Francine Cavanaugh said she has been unable to reach her sister, son, or friends in the Asheville area.
“My sister checked in with me yesterday morning to find out how I was in Atlanta,” she said on Saturday. “The storm was just hitting her in Asheville, and she said it sounded really scary outside.”
Cavanaugh said her sister had no idea how bad the storm would be there. She told Cavanaugh she was going to head out to check on guests at a vacation cabin “and that’s the last I heard of her. I’ve been texting everyone that I know with no response. All phone calls go directly to voicemail.”
The CEO of a hospital operator that filed for bankruptcy protection in May will step down after failing to testify before a U.S. Senate panel.
Steward Health Care CEO Ralph de la Torre has overseen a network of some 30 hospitals around the country. The Texas-based company’s troubled recent history has drawn scrutiny from elected officials in New England, where some of its hospitals are located.
A spokesperson for de la Torre told the Associated Press Saturday that he “has amicably separated from Steward on mutually agreeable terms” and “will continue to be a tireless advocate for the improvement of reimbursement rates for the underprivileged patient population.”
A CBS News investigation that spanned nearly two years documented how private equity investors and de la Torre extracted hundreds of millions of dollars while healthcare workers and patients struggled to get the life-saving supplies they needed.
In August, the company closed two Massachusetts hospitals, leaving about 1,200 workers jobless, according to the state.
Sen. Bernie Sanders of Vermont, who chairs the Senate Health, Education, Labor and Pensions Committee, said earlier this month that Congress “will hold Dr. de la Torre accountable for his greed and for the damage he has caused to hospitals and patients throughout America.”
De la Torre’s resignation is effective Oct. 1. The Senate approved a resolution on Wednesday that was intended to hold him in criminal contempt for failing to testify before a committee.
The Senate panel has been looking into Steward’s bankruptcy. De la Torre did not appear before it despite being issued a subpoena. The resolution refers the matter to a federal prosecutor.
Kayla Bartkowski/The Boston Globe via Getty Images
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North Carolina’s Asheville devastated after Helene’s damage cuts power, floods roads
Embattled Steward Health Care CEO Ralph de la Torre to resign
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North Carolina’s Asheville devastated after Helene’s damage cuts power, floods roads