'This is our focus': IRS identifies which filers will be targeted by 'new wave of audits'

The Internal Revenue Service (IRS) got an appropriation of much-needed funds to address its backlog and ramp up enforcement. And this week, the agency made it clear who it intended to target with its new resources.

CBS reported Thursday that the IRS is rolling out plans for a "new wave of audits" focused on three specific groups of federal tax filers. Thanks to the Inflation Reduction Act's $80 billion in additional IRS funding over the next 10 years, agents will now have the ability to zero in on large corporations and the super-rich. The agency is emphasizing that filers who make less than $400,000 per year — the vast bulk of ordinary Americans — will not see any increased enforcement action.

"It sets an important tone and message for complex filers, high-wealth filers, that this is our focus area," IRS commissioner Danny Werfel said.

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Werfel identified three primary categories of federal tax filers who will be subjected to increased enforcement activity in the coming years: Large corporations with assets greater than $250 million, large partnerships with assets in excess of $10 million and wealthy individuals who have more than $10 million in total positive income per year.

Audit rates for large corporations, for example, will nearly from 8.8% of returns audited in 2019 to almost 23% by 2026. Over that same time period, Werfel said IRS audits will increase on wealthy partnerships from 0.1% to 1% — a tenfold increase. Its audit rate of super-rich individual tax filers is due to see a 50% increase, from 11% five years ago to 16.5% in the next two tax years.

"There is no new wave of audits coming from middle- and low-income [individuals], coming from mom and pops," Werfel emphasized. "That's not in our plans."

The IRS commissioner also insisted that fears over a supposed armed force of 87,000 new IRS agents over the next decade were overblown and mischaracterized. Werfel told CBS that "any lingering myths about a supersized IRS" were untrue, as the new hires were meant to account for attrition. In recent years, the agency has been experiencing an exodus of agents due to retirement, and has not hd the funding to replace them until recently. He added that even with the new agents joining the IRS, its staff numbers were still far lower than they were in the 1980s and 1990s.

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Earlier this year, funding woes within the IRS were highlighted in a Washington Post report about the agency being unable to catch up with wealthy individuals who had gone for several years without filing any tax returns. According to the Post, there were roughly 25,000 taxpayers who made more than $1 million in income who hadn't filed a federal tax return in at least one year between 2017 and 2022. An estimated 100,000 other filers making at least $400,000 also didn't file a return over that five-year window.

In those instances, the IRS sends a notice of a missed return, prompting a taxpayer to either file one voluntarily or have the agency file one on their behalf. In the latter instance, the agency has the ability to assess a federal tax payment and levy the payment directly from an individual's bank account if they still refuse to send a payment.

"When people don’t file their taxes, they need to know there’s a consequence," Werfel said.

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Read CBS' full report by clicking here.