Talking to your clients about the IRS

Talking to your clients about the IRS

Tell your clients what they need to know without any political bias currently circulating in the media.

President Biden signed the Inflation Reduction Act into law on August 16. This plan marks months of work by congressional leaders to address the country’s economic issues, not the least of which is an inflation rate not seen in decades. However, the bill also singles out the IRS for immediate aid – around $80 billion over the next ten years.

What to tell your client

The funds appropriated are divided into two categories. 1) to improve taxpayer services, and 2) to strengthen tax code enforcement. The nonpartisan Congressional Research Service produced an excellent analysis of these funds:

  • $45.6 billion is spent on tax enforcement in order to close the “tax gap” of average unpaid federal taxes.
  • $25.3 billion is allocated to operations support in order to pay ordinary costs such as rent, buildings, and upgraded technology.
  • $3.2 billion is spent on taxpayer services including filing and account management.
  • $4.8 billion is allocated to business system upgrading.

Over the next decade, the budget would fund the hiring of an additional 86,852 full-time employees. Not only enforcement officers but all employees, including those who answer the strained customer service lines.

Despite the current bluster, the financing will not produce an army of new tax enforcers. These enforcement officers are also not targeting any individual or institutional taxpayers with taxable incomes less than $400,000. That precise wording appears in the bill that has now been signed into law. The increased funding will not enhance the likelihood of being audited.

After reviewing the legislation, the nonpartisan Congressional Budget Office estimates that the new budget allocation will increase net government revenue by more than $124 billion. That’s money that was originally owed to the government. They’ll be able to collect it now.

Why is it important to tell your clients

The advisory services of a CPA are important at times. CPAs and accounting professionals serve as a liaison between the IRS and their clients. The IRS has been a popular subject in the 24-hour news cycle. The issues and difficulties that the government’s tax assessment and collection agency are dealing with are widely known and extremely evident at the grassroots. Clients want answers, and while CPAs may not have all of them, you owe it to your profession to approach the matter objectively and fairly.

The tax laws are very complex. Our short blog articles cannot cover in full all the nuances of the rules. Your specific facts may hold various opportunities and possible risks that only trained, experienced, and highly qualified tax specialists can spot. We encourage you to find such help, rather than trying to figure it all out on your own. Consider giving this marketplace a try by posting your project and signing up here.

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