Whether or not the Biden administration will use additional Internal Revenue Service staff for auditing working-class Americans has become a thing of political fodder in recent months.
On Wednesday, Biden’s appointee to lead the IRS, Daniel Werfel, addressed the concerns.
In testimony given to the Senate Finance Committee, Werfel echoed the administration’s policy by committing not to increase the volume of audits on Americans making less than $400,000 a year. However, it appears those making more than $400,000 a year face increased odds of getting audited.
“If I am fortunate enough to be confirmed, the audit and compliance priorities will be focused on enhancing IRS capabilities to ensure America’s highest earners comply with applicable tax laws,” he said.
Sen. Mike Crapo, R-Idaho, has pushed for a limit on audits on those making below $400,000, but as ranking member of the Finance Committee, he said he has been unable to garner Democratic support to codify the commitment.
The IRS is working to hire 87,000 new employees after the agency struggled to answer customer service questions during the pandemic. The IRS said even with additional staff, they will not be conducting additional audits on Americans making less than $400,000 annually.
This comes as the IRS garnered $80 billion in funding from the Inflation Reduction Act passed by Congress last year. Of that amount, the Congressional Budget Office estimates that $60 billion will be spent on enforcement.
Crapo said he is concerned the IRS “will waste untold taxpayer dollars chasing speculative or marginal revenue recoveries, while hardworking Americans and small businesses end up in a dragnet.”
“When I offered an amendment to statutorily protect taxpayers making less than $400,000 from increased audits, only my Republican colleagues stood up in support. No one on the other side voted ‘yes,” Crapo said.
The Congressional Budget Office estimates that the IRS’ increased funding will provide the federal government with $200 billion in additional revenue through 2031.
According to the CBO, audit rates for high-earning taxpayers fell from 2010-18 but remained relatively stable for lower-income taxpayers. The CBO says the increased staffing should return audit levels to nearly the same as a decade ago.
The CBO said a bolstered IRS “might reduce the burden on compliant taxpayers by allowing the IRS to better target noncompliant ones and to reduce the number of audits that resulted in no change in tax assessment.”
“For Democrats, this is about going after the cheating at the top and doing a better job of collecting what the wealthy and corporations already owe,” said Ron Wyden, D-Oregon, who chairs the Finance Committee.