Monthly Archives: July 2025

The IRS made a notable shift in audit strategy during Fiscal Year 2024, boosting examinations of high-income individuals in line with federal mandates—but according to a new report from the Treasury Inspector General for Tax Administration (TIGTA), important questions remain about how compliance is defined and tracked.

A Dramatic Increase in High-Income Audits

In 2024, the IRS set a course to increase oversight of those with Total Positive Income (TPI) over $400,000. This strategic move resulted in 17% of all individual audits targeting this group, a sizable jump from the mere 6% average in the previous five years. The planned number of high-income audits hit almost 71,000 returns—about 2.5 times more than the annual average between 2019 and 2023.

Both major IRS divisions saw significant shifts in their focus:

·         The Small Business/Self-Employed (SB/SE) Division nearly quadrupled its share of high-income audits, going from 12% to 42% of its total workload.

·         The Large Business and International (LB&I) Division increased its high-income audit proportion from 44% to 62%.

This rebalancing of resources means thousands more high-income returns under scrutiny, with corresponding drops in audit rates for those making $400,000 or less.

Responding to the 2022 Treasury Directive

This shift followed a 2022 Treasury Directive, issued after the Inflation Reduction Act, which directed the IRS not to raise audit rates for lower- and middle-income households or small businesses. TIGTA found that the IRS indeed reduced audits for taxpayers under $400,000 and for Earned Income Tax Credit recipients, confirming compliance with the spirit of the directive.

To carry out this strategy, the IRS brought in more revenue agents. Yet, the report noted that subsequent budget cuts and staffing reductions in 2025 now threaten to undermine these gains—a potential challenge for future compliance efforts.

Key Issues Remain Unresolved

Despite these alignment efforts, TIGTA’s audit spotlighted unresolved core questions: What exactly defines a “high-income” taxpayer across all IRS programs? How should compliance with the Treasury Directive be measured and reported? TIGTA found that the IRS had not formalized these definitions or established clear, uniform methods for tracking audit rates and compliance.

This creates gray areas in oversight—making it difficult for leadership, Congress, and the public to judge whether the IRS is truly meeting its mandate. TIGTA emphasized the need for more precise definitions and transparent procedures to ensure reliable compliance and public trust.

Looking Ahead

The report praised the IRS for realigning resources as Congress and the Treasury intended. Still, sustaining these changes is at risk unless the agency addresses the fundamental gaps in definitions, measurement, and workforce needs.

Have an IRS Tax Problem?

for a FREE Tax HELP Contact us at:
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Sources:

1.       https://www.tigta.gov/sites/default/files/reports/2025-07/2025308030fr.pdf     

2.      https://taxcontroversy.foxrothschild.com/2025/07/irs-increased-audits-of-high-income-individuals-during-fy2024-but-future-of-initiative-under-new-administration-is-doubtful/   

3.      https://news.bloombergtax.com/daily-tax-report/irs-increased-high-income-taxpayer-audits-in-2024-tigta-says

4.      https://www.linkedin.com/posts/taxnotes_irs-struggles-to-prove-compliance-with-high-income-activity-7350963633390063617-Fq_g  

Read more at: Tax Times blog

According to Law360, Gilda Beth Rosenberg, a Colombian-American businesswoman and former Credit Suisse client, was sentenced on July 25, 2025, to 2½ years in prison for conspiring with relatives to hide over $90 million from the IRS through foreign bank accounts in Andorra, Israel, Panama, and Switzerland. Alongside the prison term, Rosenberg was fined $30,000 and ordered to serve three years of supervised release.

Rosenberg pled guilty to conspiracy to defraud the United States, admitting she concealed $5.5 million in income and filed false tax returns over seven years. 

Prosecutors highlighted her cooperation in investigations, but the judge emphasized the length and seriousness of the years-long scheme. 

Rosenberg’s sentence will run concurrently with a separate wire fraud case in Texas, stemming from a scheme to secure fraudulent military vending contracts. 

This case demonstrates ongoing enforcement actions against those using offshore accounts to evade U.S. taxes.

 Do You Have Undeclared Offshore Income?

Read more at: Tax Times blog

Why did the IRS do this audit?

This report is a compilation of statistical information reported by the IRS. The data presented in this report provide taxpayers and stakeholders with information about how the IRS focuses its compliance resources and the impact of those resources on revenue and compliance over time.

What did the IRS find?

During Fiscal Year (FY) 2023, taxpayers filed more than 163 million individual and 13 million business income tax returns. Filings for all types of tax returns resulted in approximately $4.7 trillion of total tax revenue collected during FY 2023, about $207 billion less than FY 2022.

Gross Collections by Type of Tax for FYs 2020 Through 2023

In FY 2023, $10.1 billion in enforcement revenue was collected by the Automated Collection System, resulting in an average of $3.1 million collected by each Automated Collection System employee. Additionally, Field Collection collected a total of $5.9 billion, resulting in an average of about $2.9 million collected by each Field Collection employee.

The total proposed additional tax after examinations increased from about $12.9 billion in FY 2020 to $31.9 billion in FY 2023. High-income taxpayer and partnerships audits steadily increased from FY 2020 to FY 2023, but large corporation audits decreased due to the IRS’s focus on partnerships and high-income individuals. In FY 2023, the Field Examination function proposed $24.1 billion in additional tax after examination, resulting in an average of about $3.4 million in proposed adjustments by each field examination employee. A total of $7.8 billion in additional tax after examination was proposed by Correspondence examinations, resulting in an average of $2.6 million in proposed adjustments by each correspondence examination employee.

With IRA funding, the IRS began plans to increase its enforcement workforce. While the total Field Collection, Campus Collection, and Examination staff decreased from 18,472 employees in FY 2020 to 17,475 in FY 2023 due to attrition, the IRS hired 4,048 revenue officers and revenue agents in FY 2024. 

However, in January 2025, a Presidential Memorandum implemented a hiring freeze and subsequently commenced early retirement initiatives for federal employees. In February 2025, the IRS began reductions in force and reorganization plans as part of a federal-wide effort to shrink government. 

Although the IRS made substantial progress with its hiring goals in FY 2024, the rescissions of funds, hiring freeze, and future reductions in force will present a challenge to enforcing the nation’s tax laws.

 Have an IRS Tax Problem?

     Contact the Tax Lawyers at

Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243)

Read more at: Tax Times blog

In early 2025, the U.S. Tax Court issued a decision in JM Assets, LP v. Commissioner that has important implications for partnerships, the IRS, and how federal partnership audits are handled. The case challenges how and when the IRS must close partnership audits under the rules created by the Bipartisan Budget Act of 2015 (BBA).

Background: What Happened in JM Assets, LP?

JM Assets, LP, a partnership, was audited for its treatment of certain real estate sales as installment sales on its 2018 tax return. When the IRS reviewed the return, it issued a Notice of Proposed Partnership Adjustment (the first official signal that the IRS believed changes were necessary). As part of the audit process, partnerships can request to modify the IRS’s calculation of what’s owed. JM Assets made such a request in February 2023 and provided all the required materials. The IRS approved these changes in June 2023, but it delayed issuing its final adjustment notice until December—months after reviewing and approving the modifications.

The Legal Issue

Under the BBA rules, once a partnership requests a modification and provides all required information, there’s a ticking clock: the IRS typically has 270 days from when the partnership completes its submission to issue a Final Partnership Adjustment (FPA). However, the Treasury had issued a regulation that interpreted this deadline much more loosely, allowing the IRS to wait until the very end of the entire 270-day modification period—even if the partnership submitted everything earlier.

The Court’s Decision

The Tax Court strongly disagreed with the Treasury’s interpretation. The court found that Congress intended for the 270-day countdown to begin when a partnership actually submits all required modification materials—not at the end of a theoretical “modification period.” By holding that the IRS missed the deadline in issuing its final adjustment, the court invalidated the regulation and protected the rights of the partnership.

Why This Matters

This case is a big win for partnerships facing IRS audits under the BBA regime. It sets a clear, firm timeline that the IRS must follow once a partnership has met its obligations in the modification process. If the IRS is too slow, the partnership can challenge the audit results and potentially avoid additional tax.

More broadly, the decision is an example of the courts pushing back against agency rules that overstep the authority granted by Congress. This ruling will give partnerships more certainty, and likely force the IRS to move more quickly and carefully during BBA audits.

Conclusion

The JM Assets, LP case is a key reminder that even well-established IRS procedures must be grounded in the law as written by Congress. For partnerships, it creates a more predictable audit process. For the IRS, it’s a call to respect statutory limits and operate within the deadlines set by Congress.

 Have an IRS Tax Problem?

     Contact the Tax Lawyers at

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243)

Sources:

1.     https://www.currentfederaltaxdevelopments.com/blog/2025/7/2/dissecting-partnership-audit-limitations-insights-from-jm-assets-lp-v-commissioner

2.   https://www.cov.com/en/news-and-insights/insights/2025/07/tax-court-invalidates-treasury-regulation-extending-bba-partnership-adjustment-period

Read more at: Tax Times blog