On May 28, 2021, Biden announced his plans to seek $6 trillion in federal spending for the 2022 fiscal year to invest in the country’s deteriorating infrastructure and economic reform. With ongoing negotiations in Congress over how to fully fund Biden’s massive infrastructure and tax proposals, Biden has addressed his priority in investing roughly $40 billion dollars to boost the IRS enforcement budget. With hopes to shrink the nation’s economic deficits, law makers planned to revamp the Internal Revenue Service to begin strengthening the administrations enforcement on compliance activity such as increased audit examinations and tax collections to regain an additional $140 billion in revenue from unpaid taxes resulting in a net gain of $100 billion dollars over 10 years. But, as of Sunday, July 18th, these plans came to a huge halt as Republican Senators rejected the proposal to fund any additional money towards the IRS. Meanwhile, Democrats are already planning to include this high priority proposal in a separate reconciliation package.
According to the 2020 Congressional Budget Office report, the amount of individual returns the IRS has examined has dropped by 46 percent from 2010 to 2018. Additionally, examinations of corporate tax returns have fallen by 37 percent. With severe IRS budget cuts having transpired in the past decade along with the strain of the coronavirus pandemic within the past year, the IRS has been forced to adapt to a more hybrid work environment, resulting in a reduction of available staff to perform such audit examinations and collections efforts to gather outstanding taxes owed. With high hopes from the Biden Administration to push these proposals forward, many U.S. taxpayers and business owners alike could begin witnessing an increase in IRS audits in the near future if these proposals come to fruition.
