In the past, you may have heard some lawmakers say that because of the Inflation Reduction Act (IRA), an “army” of 87,000 new IRS agents will be coming to audit ordinary taxpayers. More recently, former President Donald Trump revived the discussion about IRS hiring on social media and during press and campaign events, claiming that 88,000 IRS agents are being recruited to target waitresses and their tips.
This assertion evolved from earlier claims about new IRS agents in the news since the IRA first allocated $80 billion in increased funding for the IRS over ten years. Those funds, some of which have since been clawed back by Congress, are supposed to improve tax compliance and bring an estimated $390 billion in revenue.
Trump’s latest comments have increased the number of IRS agents from 87,000 to 88,000 and narrowed the focus to waitresses and their tips. (As Kiplinger has reported, the “no tax on tips” narrative has taken hold on both sides of the aisle in the 2024 presidential election campaign.)
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Related: Can the Trump, Harris 'No Tax on Tips' Pledge Really Help Workers?
Inflation Reduction Act: 88,000 IRS agents?
The original 87,000 IRS agents figure appears to have come from a U.S. Treasury Department estimate of the level of hiring needed to maintain IRS efficiency and keep up with retirements and other staff declines.
However, the actual number of new IRS agents that will be hired remains to be seen, particularly since the IRS has struggled to attract talent in recent years.
- Of the $80 billion for the IRS in the Inflation Reduction Act, $45.6 billion was designated for enforcement.
- The Congressional Research Service (CRS) points out that more enforcement could include legal support and investments in technologies that aid IRS investigations.
- For example, the U.S. Tax Court could receive about $150 million.
And since the new law calls for more IRS hiring, there will be more IRS agents in the coming years. Those new agents will have to be trained to conduct compliance audits (which takes time), but ultimately, there will likely be an increase in audit activity.
However, increased staffing at the tax agency will include a variety of positions and roles that need to be filled at the IRS — not just enforcement agents. For example, during the 2023 filing season, the agency reportedly hired 5,000 new staff members.
Who gets audited by the IRS?
Since increased IRS enforcement will eventually lead to more audits, a common question is whether those audits will focus on low and middle-income earners.
A Government Accountability Office (GAO) report found that, in the past, lower-income taxpayers have seen higher-than-average IRS audit rates. Other data show that IRS audit rates for people with less than $25,000 a year in income were five times higher than for high-income taxpayers.
But so far, the Treasury Department has indicated that low or middle-income earners, and small businesses, won't be the focus of increased IRS enforcement activity going forward.
Ultimately though, the IRS wants to close an estimated $688 billion “tax gap.” (The tax gap is the difference between what people owe in taxes and what they actually pay.) To do that, the agency plans to focus on high-earners, large corporations, and complex partnerships. That’s potentially good news if you’re a household making less than $400,000 a year or a small business.
But, if you are wealthy, you could see some increased audit activity in the coming years. Although, it’s hard to know what higher audit rates will look like, partly because IRS audit rates have historically been low.
IRS Criminal Investigation: Armed agents?
So, it’s true that the IRS is supposed to get billions in additional funding over the next ten years and will use some of those funds to hire agents and other staff. And yes, the Inflation Reduction Act is designed to increase tax compliance, which is expected to focus on wealthy people and large corporations. So, what’s the talk about armed IRS agents?
Talk on social media about the IRS hiring armed agents could refer to the IRS CI, a division focusing on criminal tax case enforcement. IRS criminal investigation special agents are authorized to carry firearms in certain circumstances.
- Those approximately 2,100 agents work on cases where arrests are sometimes warranted.
- However, the IRS does not arm its typical enforcement agents, despite what you may have heard.
So, while enforcement activity, taxpayer services, and operations at the IRS could get a boost in the coming years because of the Inflation Reduction Act, you shouldn’t have to worry about a literal army of new IRS agents coming for your tax dollars — or tips.
Instead, stay informed, and tune in to any announcements or audit requests from the IRS.
Related Content
- Should Taxes on Tips Stay or Go?
- Tax Credits in the Inflation Reduction Act
- Does the IRS Audit Some Taxpayers More Than Others?
- IRS Audit Red Flags
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