Will More IRS Funding Boost Wealthy Client Audits?

Financial advisors play a big role in strategic tax planning for their clients. That means staying up to date on proposed changes to the tax law, such as a bill Sen. Elizabeth Warren introduced that would add more than $30 billion to the Internal Revenue Service budget.

According to a press release from Warren's office, the funding would provide the IRS "the resources it needs to go after wealthy tax cheats and close the tax gap. The bill would rebuild and strengthen the IRS by permanently removing the IRS's base budget from the annual appropriations process and providing $31.5 billion in mandatory annual funding."

The release adds that the new funding would allow the IRS to "fairly enforce the tax code, modernize its (information technology) systems and improve taxpayer services."

Proposed Budgetary Changes at the IRS

It's not just Warren proposing budgetary changes at the IRS. Earlier this year, President Joe Biden put forth the American Families Plan that would boost IRS tax laws enforcement with $80 billion in funding over the next decade. The U.S. Department of the Treasury says that would cover hiring specialized enforcement staff and modernizing antiquated information technology.

The Treasury Department also points out that "the additional resources will go toward enforcement against those with the highest incomes, and audit rates will not rise relative to recent years for those earning less than $400,000 in actual income."

Warren announced her proposal in May – before the nonprofit news organization ProPublica obtained tax returns going back 15 years for many wealthy Americans. The data includes the returns of billionaires such as Mark Zuckerberg, Bill Gates, Elon Musk and Warren Buffett.

ProPublica's cache of documents ignited discussions in the media about the U.S. tax code, which allows many high net worth individuals to pay little in income tax, relative to their holdings.