Staff Reports
The Internal Revenue Service (IRS) has released a report detailing President Joe Biden’s budget plan for 2025. This report shows that the budget plan would prevent any cuts to the IRS until 2034. In addition, the report also indicates that audits on wealthy taxpayers, large corporations, and large partnerships will significantly increase in the near future.
The IRS received an $80 billion increase in funding through the Inflation Reduction Act, but this was reduced by $20 billion during negotiations. As a result, the IRS has been able to add around 11,000 jobs since 2022 and plans to add another 14,000 jobs by 2029. The agency also aims to significantly ramp up audits on large corporations and high-income individuals.
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Under the new plan, audit rates for large corporations with assets over $250 million will nearly triple to 22.6% in 2026, up from 8.8% in 2019. The IRS also plans to increase audits of large, complex partnerships with assets greater than $10 million and individuals with income of more than $10 million.
The IRS has assured that audit rates will not increase for small businesses and taxpayers making under $400,000, and these rates will remain historically low. The agency believes that the additional funding is necessary to keep pace with the growing number of filings by large corporations, complex partnerships, and high-income individuals, while also ensuring that middle-income taxpayers are not disproportionately affected.
Without the additional funds, the IRS predicts that it would be forced to reduce its enforcement staff by more than 50% in 2030, which could lead to a higher share of audits falling on low- and middle-income taxpayers. President Biden’s fiscal 2025 budget includes mandatory funding for the IRS that could sustain its current level through 2034 at a cost of $104 billion to taxpayers.
The plan has raised concerns among some conservatives, who worry that the increased audits and budget plan could negatively impact middle-income taxpayers. They argue that the focus on wealthier individuals and large corporations may not necessarily align with the IRS’s promises. The IRS’s strategic plan and the budget proposal from President Biden will likely continue to spark debates over tax policy and government spending in the coming months.
