IRS audits under scrutiny post-IRA

Following the Inflation Reduction Act, the IRS was instructed not to increase audits for those earning below $400,000 annually. A report from TIGTA indicates that the IRS has made “limited progress” in tracking these audits. The Inflation Reduction Act allocated $79.4bn to the IRS, which was later reduced to $57.8bn. Treasury Secretary Janet Yellen directed the IRS to focus on larger entities and not small businesses or lower-income households. TIGTA’s review highlighted that the IRS has yet to finalize its methodology for audit coverage calculations. The IRS initially considered excluding certain examinations from audit calculations but later abandoned this idea due to concerns about trust and compliance. TIGTA also noted the lack of a clear definition for “small business” in relation to the directive. The IRS has agreed to collaborate with the Treasury Department to finalize the methodology and improve documentation of its processes.