On September 8th, the IRS announced that it will be increasing its focus on the wealthy and away from working-class families. Depending on which of these classes you find yourself, this could be good news or bad news.
For most folks, the prioritization on income earners exceeding $1 million per year, with $250,000+ in recognized tax debt, may seem insignificant; however, this group typically consists of business owners and therefore, will have a trickle-down effect to a wider population. The IRS specifically mentions that they are targeting large partnerships and are expanding the use of artificial intelligence for surveillance and audit. This will impact many different industries.
I think we can all agree that we want everyone to pay their fair share, so I hope they are successful in finding tax evaders, scammers, and crooks. Revenue Officers did recover an additional $38 million from 175 taxpayers last year through audits and this new focus. At the same time, for those that aren’t purposely evading tax, the announcement should still be a warning to make sure your books and records are clean and that you understand the tax strategies that your tax, legal, and financial advisors are employing on your behalf. Will there be more cost to these businesses due to this new focus and use of technology? Will they lose productivity due to additional audits and IRS requests? Only time will tell, but that could be an additional impact on businesses.
In addition, most CPAs that I know have already been under tremendous stress with the various changes that have happened in the tax code over the last 5 years. New tax legislation from the Trump administration, COVID tax changes, PPP loans, ERC credits, and SECURE Acts are just a few new tax laws affecting businesses and that excludes all the individual taxpayer impacts, which are also plentiful. On the backend of the current tax environment is a sunset provision that will impact 2026 and beyond if additional tax legislation is not passed. It’s no wonder why many CPA firms are not taking on new clients, why the industry is seeing a decline in numbers and an increase in retirements, and why you should be kind to your trusted CPA.
For those that aren’t in the targeted high-income group, and particularly those that earn less than $400,000 per year, the IRS stated they will ensure they do not increase audit rates. This is a welcome note for most taxpayers. The IRS announcement also concludes with a positive note for all: they will be increasing their attention on audit fairness and protection for all taxpayers from a variety of scams and fraud schemes.
This announcement may not impact everyone, but tax laws do. Being inclusive of taxes in your investment and financial planning strategies is a must. At Pathfinder, our team of CERTIFIED FINANCIAL PLANNER™ professionals incorporates tax planning into all our clients’ financial plans whether they are business owners, executives, professionals, or retirees. If you’re looking for a trusted financial planning and investment advisory team, we’d appreciate the opportunity to guide you on your path forward.
Advisory services offered through Commonwealth Financial Network®, a Registered Investment Advisor.
Emma Dill - Nov 27, 2023
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