IRS Enforcement and Improvements – Belk on Business – Episode 170

The tax code and implementation are to get us as taxpayers to act in a certain manner. Last year the IRS was granted an additional $79 billion in funding over the next ten years. Broken down into the following areas:

- $46 billion for enforcement “to determine and collect owed taxes, to provide legal and litigation support, to conduct criminal investigations (including investigative technology), to provide digital asset monitoring and compliance activities, to enforce criminal statutes related to violations of internal revenue laws and other financial crimes, to purchase and hire passenger motor vehicles.”

- $25 billion for operations support will support taxpayer services and enforcement programs, including “rent payments; facilities services; printing; postage; physical security; headquarters and other IRS-wide administration activities; research and statistics of income; telecommunications; information technology development, enhancement, operations, maintenance, and security; the hire of passenger motor vehicles.”

- $5 billion – system modernization funding will go towards several projects, including “development of callback technology and other technology to provide a more personalized customer service but not including the operation and maintenance of legacy systems.”

- $3 billion – taxpayer services programs such as “pre-filing assistance and education, filing and account services, and other services.”

Objectives from IRS Strategic Operations Plan, 2023:

- Dramatically improve services to help taxpayers meet their obligations and receive the tax incentives for which they are eligible

- Quickly resolve taxpayer issues when they arise

- Focus expanded enforcement on taxpayers with complex tax filings and high-dollar noncompliance to address the tax gap

- Deliver cutting-edge technology, data, and analytics to operate more effectively

- Attract, retain, and empower a highly skilled, diverse workforce and develop a culture that is better equipped to deliver results for taxpayers

Issues:

- How will the IRS protect taxpayer rights?

- The IRS will need to hire more employees which begs the question of how will they find personnel, train them effectively and implement properly?

- There isn’t enough funding for improvement of taxpayer services past the first four years

What does the additional enforcement action mean for us as business owners:

1) Keep proper books and records – know what records you need to keep, how long and how they should be documented. Use technology where possible.

2) Use a licensed tax professional experienced in your industry.

3) When utilizing tax strategies, make sure you understand the pros and cons and use well vetted and reputable individuals and companies for placement of capital.

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