If you’re on a Galaxy Fold, consider unfolding your phone or viewing it in full screen to best optimize your experience.
Credit Cards
Banks
Brokers
Crypto
Mortgages
Insurances
Loans
Small Business
Knowledge
by Christy Bieber | Published on Oct. 11, 2022
Image source: Getty Images
An IRS audit isn't fun, so there's good reason to ask this question.
Check out our pick for Best Cash Back Card of 2022
The Inflation Reduction Act that was recently signed into law by President Joe Biden provided money for more IRS enforcement. An estimated 87,000 new IRS agents are expected to be hired, which means there will be many more people to conduct audits.
Audits can be time consuming and stressful, and many people are worried they’ll be audited and have to drain their bank account to deal with it. But are you really at an increased risk of becoming the subject of an IRS investigation? Here’s what you need to know.
The Inflation Reduction Act undoubtedly appropriated billions of dollars to the IRS for new hires. However, this does not necessarily mean there will be tens of thousands of new auditors out there. One Treasury official indicated to Reuters that many of the new agents who are being hired will be replacing people who are retiring, or will be working in customer service to help answer questions or field telephone calls.
Discover: This credit card has a rare $300 welcome bonus
More: These 0% intro APR credit cards made our best-of list
Still, when the Inflation Reduction Act allocated $80 billion in new funding to the IRS, this allocation was projected to generate as much $203.7 billion in revenue between 2022 to 2031 — so, obviously, there is a plan for the IRS to engage in more enforcement efforts in order to collect additional taxes.
The big question, though, is who exactly is most likely to face increased scrutiny. And there are a few possible groups of people who could find themselves in this position.
One group is individuals who claim the Earned Income Tax Credit. During a House Oversight Subcommittee hearing, the IRS chief taxpayer experience officer indicated returns on which the EITC is claimed have “historically had high rates of improper payments and therefore require greater enforcement.” This credit is available mostly to lower-income individuals, so this is one group who could see their audit risk increase.
The goal of the funding in the Inflation Reduction Act was also to help ensure that wealthy individuals are paying their fair share of taxes and that self-employed workers are also paying the full amount they owe, since it can be harder to track their compliance compared with W-2 employees who simply receive a paycheck. So it is possible more high earners and small businesses will soon be audited.
Most people and companies, however, will not need to worry about this for a while. It will take time to hire and train new agents, so the number of audits is not likely to increase substantially until 2026 or 2027.
Audits are scary for anyone, but if you comply with the tax rules and pay what’s due, then you won’t have to worry as much.
Fortunately, there are plenty of great tax software options out there that are easy to use and help you ensure you are claiming all legal deductions and credits while still complying with IRS requirements. Using a good tax software can be the ticket to reducing the chances of triggering an audit with a mistake — and to ensuring that if you are audited, you’ll come out unscathed.
If you're using the wrong credit or debit card, it could be costing you serious money. Our expert loves this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee.
In fact, this card is so good that our expert even uses it personally. Click here to read our full review for free and apply in just 2 minutes.
Read our free review
Christy Bieber is a personal finance and legal writer with more than a decade of experience. Her work has been featured on major outlets including MSN Money, CNBC, and USA Today.
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
Related Articles
Best Budget Apps
Best Cash Back Apps
The Ascent’s Definitive Credit Score Guide
Best Debt Payoff Apps
Best Budget Apps
Best Cash Back Apps
The Ascent's Definitive Credit Score Guide
Best Debt Payoff Apps
The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters.
Copyright © 2018 – 2022 The Ascent. All rights reserved.