Biden Administration Pushes for $80 Billion IRS Funding Increase to Ramp Up Audits of High-Earners
This week President Joe Biden, on the heels of his previous IRS budget increase proposal of $1.2 billion has announced his “American Families Plan,” which he will detail before addressing a joint session of Congress on Wednesday, is expected to propose giving the IRS an additional $80 billion in funding, as well as, more authority over the next decade to help eliminate tax evasion by high-earners and large corporations.
On top of the additional money and enforcement power, the IRS would also require new disclosure requirements for the wealthy who may be concealing income from the government using pass-through entities such as partnerships and S-corporations, or through structures overseas. These new efforts are being purported to help level the playing field between the typical American workers and the ultra-wealthy who employ complex efforts to avoid partial or full taxation.
In addition to the increased audits on corporations and wealthy individuals, the administration is seeking to raise the top marginal income tax rate for wealthy Americans from 37 percent to 39.6 percent and raise the capital gains tax rates for those who earn more than $1 million a year. The president’s plan also will call for raising the tax rate on income that people earning more than $1 million per year receive through stock dividends.
This new plan would help to provide dedicated funding to the IRS, enabling officials to progressively increase their enforcement practices without having to worry about future issues such as budget cuts. For potential tax evaders, these new steps highlight the administration’s dedication to close the tax gap, the amount of money that taxpayers owe but that is not collected each year, and to demonstrate that increased enforcement activity will not be soon diminished.
An important tool that the IRS intends to use to improve its ability to enforce the federal tax laws is investing heavily in information technology improvements to help the agency better target its audits of high-earners and companies.
For more information on the IRS funding hike and what it could mean for your next tax filing, contact us here.