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The Internal Revenue Service will launch a new group focused on scrutinizing pass-through organizations as part of its broader plan for beefing up enforcement work against the wealthy, according to an agency statement on September 20, 2023.

This new unit will leverage Inflation Reduction Act funding to disrupt efforts by certain large partnerships to use pass-throughs to intentionally shield income to avoid paying the taxes they owe. These efforts are consistent with our broader commitment to use Inflation Reduction Act dollars to end the era of historically low error rates for wealthy and large entities, while making sure middle- and low-income filers continue to see no change in audit rates for years to come."

Following a top-to-bottom review of enforcement efforts, the IRS announced on September 8, 2023 the start of a sweeping, historic effort to restore fairness in tax compliance by shifting more attention onto high-income earners, partnerships, large corporations and promoters abusing the nation's tax laws.

President Joe Biden signed the Inflation Reduction Act into law in August 2022. It gave the IRS nearly $80 billion in increased funding, though this year's Fiscal Responsibility Act cut $1.4 billion, including money for IRS enforcement and operations support, and a side deal between the White House and lawmakers cuts $20 billion more from the agency, leaving The IRS with roughly $60 billion in net increased funding for enforcement.

Greater resources are needed to evaluate the compliance of pass-through entities, especially large and complex ones, and pass-through audit rates dropped because of funding cuts, the agency said in the strategic plan.

The agency audited 4.4% of pass-throughs in 2010, and the rate dropped to 0.1% in 2017, the most recent year with nearly all audits closed, according to the plan, which was released in April.

Earn > $400,000 of Income?

Have Unreported/Under Reported Income?

Marini & Associates, P.A. 

Read more at: Tax Times blog

In IR-2023-172 dated Sept. 15, 2023, the IRS explained that as part of larger transformation work underway to make improvements, the Internal Revenue Service announced the opening of  more than 3,700 positions nationwide to help with expanded enforcement work focusing on complex partnerships and large corporations

These compliance positions will be open in more than 250 locations nationwide and is part of a larger effort to add fairness to the tax system and expand tax enforcement involving areas of concern with high-income earners, partnerships, large corporations and promoters. 

The Hiring Will Be For Higher-Graded Revenue Agents,
Which Are Specialized Technical Positions
That Generally Focus On Audits.

This continued hiring effort builds off earlier efforts to add taxpayer service employees at the IRS, part of the landmark Inflation Reduction Act funding approved in August 2022.

"This is another important step for the IRS as we work to transform the agency and make improvements," said IRS Commissioner Danny Werfel. This next wave of hiring will help the IRS add key talent like tax accountants to help reverse a decade-long decline of audits for the wealthy as well as complex partnerships and corporations.

These New Employees Will Be Focused On Higher-Income
And Complex Tax Areas Like Partnerships, Not Average Taxpayers Making Less Than $400,000."

"This is an exciting time to be at the IRS," said IRS Human Capital Officer Traci DiMartini. "The IRS provides a competitive financial package for people with expertise in this high-demand area. For people with accounting and financial backgrounds, we encourage them to take a close look at the benefits of working for the IRS and serving our nation."

Earn > $400,000 of Income?

Have Unreported/Under Reported Income?

     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

The Treasury Inspector General for Tax Administration (TIGTA ) issue Report Number: 2023-30-054 on August 31, 2023 concluding that the IRS Needs to Leverage the Most Effective Training for Revenue Agents Examining High-Income Taxpayers.

In August 2022, the Inflation Reduction Act of 2022 (IRA) was enacted providing almost $80 billion (with $45.6 billion for enforcement activities) to the IRS over a decade. In this report, TIGTA assessed the IRS’s strategy to train employees hired specifically to conduct audits of high earners and large businesses that underreport income.

In August 2022, the Secretary of the Treasury stated that IRA funding was intended in part to increase examination of high-income taxpayers. The Secretary also directed that no additional resources, including any new hires, shall be used to increase the share of small businesses or households below the $400,000 threshold that are audited relative to historical levels. 

The Large Business And International (LB&I) Division
Has Expertise In Training Revenue Agents
On Examining High-Income Taxpayers.

However, the IRS’s efforts to train new hires do not appear to be fully leveraging this expertise. 

The IRS treats this training as specialized and only offers it when necessary for employees auditing in this specialized area. Commensurate with the new IRA funding, the IRS should revise its training paradigm and expose new hires to the types of issues associated with high-income taxpayer returns. 

• The Small Business/Self-Employed Division’s Fiscal Year 2023 Examination Plan showed no significant increase in the number of high-income individual audits. 
• Additionally, the LB&I Division’s resource allocation plan is not detailed enough for TIGTA to assess the IRS’s intended efforts to examine high-income individuals with the increased enforcement funding. 
• The IRS does not have a unified or updated definition for individual high-income taxpayers. 
• The Tax Reform Act of 1976 required annual publication of data on individual income tax returns reporting income of $200,000 or more. The current examination activity code schema still uses $200,000 as the main threshold. 

The IRS’s Inflation Reduction Act Strategic Operating Plan sets forth leveraging data analytics to improve the IRS’s understanding of the tax filings of high-wealth individuals and to address potential noncompliance. 

Consequently, The IRS Needs To Update Its High-Income Taxpayer Definition To Better Identify And Track Examination Results And Manage Examination Priorities.

TIGTA made six recommendations, including that the IRS leverage the LB&I Division’s extensive knowledge base by embracing its current high-income individual training content and ensure that examination plans follow the Secretary of Treasury’s Directive to prioritize coverage of individual high-income earners over $400,000. 

The IRS agreed or partially agreed with five of the six recommendations and disagreed with one recommendation.

Earn > $400,000 of Income?

Have Unreported/Under Reported Income?

Marini & Associates, P.A. 

Read more at: Tax Times blog

According to Law360, in the case Piper Trucking & Leasing LLC v. Commissioner, docket number 20468-21L, the U.S. Tax Court ruled that digitally calculated penalties imposed on employers who fail to file certain tax forms do not require supervisory approval.

The Internal Revenue Service may proceed with its plan to collect penalties assessed to Piper Trucking & Leasing by the agency's combined annual wage reporting program after the company failed to file Forms W-2 and W-3 with the Social Security Administration.

The SSA twice attempted to reach out to the company to remedy the issue, the opinion said, but after the Ohio-based company failed to respond, the SSA referred the matter to the IRS. Using the software, the agency then assessed Piper a penalty under Internal Revenue Code Section 6721(e), an assessment Piper argued was invalid.

Under Section 6751 of the IRC, no penalties shall be assessed unless the initial determination is approved by the immediate supervisor of the person making the decision. 

However, the Same Section Provides that
Penalties Calculated Without Human Interaction
are not Subject to the Approval Requirement

___________________ 

Have An IRS Penalty 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