Since taking office, President Biden has made a few stands that surprised the American public. Most recently, he announced a fairly substantial new initiative for the Internal Revenue Service. Along with directional change and increased number of staff comes a hefty boost to the IRS’ operating budget. One of the main directives is to increase audits conducted on corporations and the wealthy.

New Budget Guidelines

The $80 billion overhaul was essentially created for the sole purpose of building new ways to manage tax regulations. A popular theory is that increasing the chance of an audit will effectively curb various forms of tax fraud. Most notably, tax evasion as it relates to corporations, organizations, and wealthy individuals or families.

As one of the largest budget increases in IRS history, this effort comes with a very lofty goal. Biden and his cabinet determined that this is money well spent. This one-time budget boost is anticipated to generate up to $700 billion in revenue for the IRS over the next ten years.

Select and Random Audits to Multiply

This substantial staff growth comes on the heels of decades of decreased staffing due to consistent budget cuts. The Biden administration seeks to reverse the effects of limited staffing in many federal programs and departments. The first staffing initiative within the IRS is expected to focus heavily on taxpayer oversight with specific impact.

Inheritance tax breaks allow individuals to transfer up to $11 million ($23 million for couples) to the next generation without incurring tax liability. According to some IRS calculations, there is a severe underreporting of wealth transfer. Families who wish to circumvent the nearly 50% tax rate for inheritance planning may undervalue their assets in an attempt to avoid paying taxes. Bolstered audits will likely uncover millions in potential tax revenue for the IRS within the first year.

Supplemental staffing is not meant to raise the alarm, and there is more involved than simply a lingering audit threat. In addition to increased oversight, the funding hike will also offer benefits to most taxpayers. A higher number of staff and improved online services will make it easier and more convenient for users to connect with live agents or find answers to frequently asked questions.

Qualified Wealth Valuation

To determine the true value of transferred assets, the IRS is now calling on some of the same agencies used by corporations and wealthy families. Expert valuation services like Appraisal Economics offer a complete and unbiased look at past transactions, as well as current assets. Anyone who has a concern about the possibility of misrepresentation of their earnings or tax liability should consider an independent valuation from a qualified firm.

Since the IRS is reaching out to valuation firms to reappraise asset values computed by taxpayers, individuals and corporations should consider obtaining a qualified appraisal report. Advanced preparation brings clarity and may help avoid the unpleasantries of an unfavorable review by the IRS.