Some clarity is emerging regarding statements from Biden administration officials that no one making less than $400,000 will see higher audit rates from the Internal Revenue Service, which is about to step up its scrutiny of wealthy taxpayers. The Inflation Reduction Act — the tax and climate package enacted last summer — earmarked $80 billion for the IRS over the next decade and a half. The money is intended to provide for more audits of corporations and wealthy households.
Ahead of the bill’s passage, Treasury Secretary Janet Yellen pledged that there would be no increase in the rate of audits for households and small businesses earning below $400,000 “relative to historical levels.” But Republican critics and other observers have asked what “historical levels” might actually mean. The audit rate on returns for tax year 2018 is the reference point to remember, IRS Commissioner Danny Werfel told senators on Wednesday. He emphasized that “there’s no surge coming for workers, retirees and others.” The IRS audited fewer than 1% of 2018 returns between $1 and $500,000, according to statistics that the tax agency released last week. The agency has three years to start an audit from the time it receives a return. Also read: The IRS wants more people working in tax enforcement. Now it has to find them. The numbers show that 0.4% of returns for taxpayers earning up to $25,000 were audited. That figure was 0.3% for returns between $200,000 and $500,000 and more than 9% for returns over $10 million, the IRS statistics show. Six years earlier, more than 13% of returns over $10 million were getting scrutinized, according to the IRS. “Help us with understanding what the words ‘historic level’ means,” Sen. James L …
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