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No audits under $400k means more audits above

Danny Wefel's promise

Danny Werfel's appoitnment to Commisioner of the IRS is currently before the Senate Finance Committee. Prominent within the hearing are explanations and committements about use and oversight of the IRS's budget, and what the IRS is planning to do to modernize and streamling federal tax administration.

There are two inplications. First, maintaining collections revenue (as opposed to voluntary compliance revenue) will necessarily increase the number of audits to taxpayers earning more than $400k per year.

Secondly, the current audit rate for taxpayers earning less than $400k is already abyssmally low, at about 2.3%, and many of these audits are directed at Schedule C and Schedule E taxpayers, the self-employed and small business owners.

By comparison, audits of high income tax returns with income greater than $500k, are audited at 11.6%. The 'proportion' of audits of $400k and lower is therefore about 20%.

The IRS has pledged to hire 80, 000 new agents, an increase in the workforce that is sorely needed. Audits of high income taxpayers will necessarily increase over the next three years.