From the Practice Corner: THE IRS UPDATE
As you know by now, Congress authorized $80 billion for the IRS as part of the 2022 Inflation Reduction Act. Of that $80 billion, $45.6 billion is earmarked strictly for compliance and enforcement. The IRS is using most of this money to hire 87,000 new personnel and to modernize their 1960s-era computer systems so they can quickly and more easily identify non-filers, garnish paychecks, levy bank accounts, and file federal tax liens against your clients. The IRS has already hired over 10,000 new Practitioner Priority Service (PPS) assistors, Automated Collection System (ACS) operators, Revenue Officers, Revenue Agents, and Special (CI) Agents. Since most of the $80 billion is going to be spent in the next few years, we are going to see a gradual ramp-up in many more audit and collection cases. The IRS is going to be auditing many more pass-through entities (like Subchapter S corporations) for reasonable compensation (941 employment tax) issues and high-income earners, specifically non-filers who are earning over $100,000 whether on a W-2 or
Schedule C. Other areas the IRS is focusing on are cryptocurrency traders, LLCs, and partnerships. Also, the recent congressional claw back of $20 billion (of the $80 billion), over several years, will have very little to no effect on reducing the IRS’ compliance and enforcement initiatives already set in motion. They still have plenty of funds to carry this out. Let’s be real for a minute ... the IRS collected $4.9 trillion in 2022, representing 97% of the United States’ total budget. Everyone knows, politicians included, that the IRS is not going anywhere and has been starved of proper funding for nearly a decade. As of this writing, the IRS floodgates are open, as they are hiring new revenue officers and new revenue agents in addition to the 10,000 new hires I mentioned. In June 2023, the IRS started sending out 8 million automated collection notices, reversing their “hands- off” approach during COVID-19. There is a sense of urgency to spend this new funding in the earlier years, even though it is supposed to be spread out over 10
years because the current administration is afraid of a new administration coming into power and reversing course. What this means for you is that now is the time to get your name out there. Now is the time to market your firm. Now is the time to be online so prospects can find and hire you. Therefore, it’s important to start or ramp up marketing now so when people do a search in your local area, your name comes up and you get the business. We are already seeing an influx of new tax resolution cases like we have never seen before. I have been in this business for a long time. The last time the stars aligned like this (major IRS funding and a recession) was back in 2009-2011, during the Great Recession. I had my most profitable years during that time. We’re going to see IRS staffing levels, audits, and collections cases that we haven’t seen since 2010. Are you ready? Can people who need help find you? What are you doing to capitalize on this opportunity? –Michael Rozbruch
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