On May 2, 2024, the IRS released its 2024 update to its strategic operating plan highlighting the impact of the Inflation Reduction Act (“IRA”). In the updated plan, the IRS notes that underfunding of the agency from 2010 through 2021 attributed to understaffing, which led to a decline in audit rates for large corporations, large partnerships, and high-income individuals.

During that period, the audit rate of large corporations with assets over $250 million fell to 8.8 percent in tax year 2019, a decrease from 28.5 percent in tax year 2010. The agency plans to use the funds received through the IRA to approximately triple audit rates of large corporations and anticipates an increase of the audit rate to 22.6 percent in tax year 2026.

The IRS also plans to increase audits of large partnerships and wealthy individuals. The agency targets an increase in exams for large partnerships from 0.1 percent in tax year 2019 to 1 percent in tax year 2026 and an increased audit rate for wealthy individuals making over $10 million in total positive income from 11 percent in tax year 2019 to 16.5 percent in tax year 2026. The IRS claims that it is committed to not increasing audit rates for taxpayers making under $400,000.

The IRS has already started its campaign of targeting high-income taxpayers following its February initiative that sent out compliance letters to high-income non-filers between tax years 2017 and 2021.

How the IRS Plans to Accomplish its Goal

The IRS seeks to continue its increase in the number of fulltime employees. In fiscal year 2023, the IRS had 82,990 fulltime employees. By 2026, the agency plans an increase in fulltime employees to roughly 87,700 people. The IRS anticipates the growth in fulltime staff will directly correlate with increased audits of wealthy taxpayers.

Further, the Service plans to improve its online services and expand upon its digital platforms for taxpayers. By fiscal year 2025, the IRS aims to accomplish its “priority efforts” by expanding digital copies of most notices and letters, providing 150 additional non-tax forms in digital mobile formats, enabling authorization of third-party access to accounts for filing purposes, allowing business to view their transcripts, and allowing businesses to view and manage payments.

Lastly, the IRS plans to update its technology platforms for employees. The agency intends to modernize its coding language. This will allow for the retirement of its over 60-year-old legacy code. The IRS’s technological updates also include an expansion to the Service’s cybersecurity and the implementation of a more centralized access to near real-time data, which will improve taxpayer services, enforcement, and operations for personnel.