On May 20, 2021, President Joe Biden proposed hiring 86,852 new IRS agents over the next 10 years. The proposal from the U.S. Department of Treasury also includes a budget increase of $80 billion for the federal agency.
The agency estimated uncollected taxes to be $554 billion just in 2019. IRS Commissioner Chuck Rettig thinks that number could be closer to $1 trillion. The majority of that tax gap (80%) is made up of those who underreport their incomes, or take too many deductions.
The remainder of the tax gap can be attributed to those who fail to file a tax return entirely, and those who file but don’t pay what they owe.
The $80 billion budget increase would be phased in, with the budget increasing by 10% each year, and being allotted both towards increasing audits, and updating the agency’s computer systems.
The increased hiring would also take place over time, with the workforce increasing by 15% each year. However, the IRS had the budget for new hires in 2020 and only achieved 37% of their hiring goal, failing to hire the 5,000 agents they had intended to.
The U.S. Treasury American Families Plan Tax Compliance Agenda would also require increased reporting by financial institutions on both personal and business accounts.
If you find yourself or your client the subject of an audit, keep in mind that careless errors in reporting income are punishable with a 20% penalty, and willful tax fraud comes with a 75% penalty and the possibility of jail time.
