After years of declining funding, the Internal Revenue Service (IRS) has finally received a major boost in its budget. The Inflation Reduction Act allocates an additional $80 billion to the agency over the next decade. This latest reckless tax and spending spree is almost six times the IRS’s annual budget of around $13 billion. Find out accounting and tax preparer rancho Cucamonga to learn about more this.

How will IRS Use the $80 Billion Funding

As the IRS is aiming to collect more in taxes, 4% of the total funding is reserved to help taxpayers and 57% to audit taxpayers. Corporate and high-net-worth tax dodgers are the main target of the agency. The remaining amount is meant for technology, operations, a direct free e-file system, hiring additional phone representatives, and more, among other things.

The new IRS funding will be earmarked as follows:

? $3 billion for taxpayer services
? $45 billion for enforcement
? $25 billion for operations support
? $4 billion for business systems modernization

Projected Results of the IRS Funding Utilization

Collectively, these improvements are expected to drive approx. $203 billion in revenue to the IRS between 2022 and 2031, according to the Congressional Budget Office.

Other projections are:

? Total revenue agents increase by over twice as many as today, 2031.
? Audits for those earning below $400K could increase fourfold.
? The investment in the IRS may raise nearly $124 billion over the next decade.

Tips to Plan for the Restored IRS

The most important tip is: Keep accurate and complete records and file your tax returns timely and completely.

Key special areas of concern are:

Cryptocurrency: The draft Form 1040 for 2022 asks this revised cryptocurrency question, “At any time during 2022, did you (a) receive (as a reward, award, or compensation); or (b) sell, exchange, gift, or otherwise dispose of a digital asset (or a financial interest in a digital asset)?”

When the IRS inquiries about an asset on this page, it’s a high-priority item. So, if you’re engaged in cryptocurrency transactions, it’s critical to keep good records and report any income you earn. You can always hire tax preparer Ontario ca to learn more about this.

S Corporation Compensation: If you’re an S corporation shareholder-employee, make sure your S corporation pays you a reasonable salary and perks. Moreover, it should be documented how you arrived at the amount.

Syndicated Conservation Easements: Syndicated conservation easements make a key item for the IRS. These refer to real estate partnerships that buy land and donate its development rights to an eligible firm. Partners (investors) receive a charitable deduction for the easement’s value.

Some partners claim charitable deductions four times their investment amount. To prevent this, the IRS examines 100% of these deals.

Note: Other ways to benefit from a conservation easement include donation development rights of the land’s parcel(s) to a qualified organization.

Offshore Accounts: U.S. residents and citizens have to pay taxes on their worldwide income. They’ve to report foreign bank accounts to the U.S. Treasury. Hiding any of these is considered a tax scam by the IRS. In the future, the IRS is expected to be even more focused on tracking offshore assets.

Business Partnerships: The IRS may become stricter towards multi-member LLCs and partnerships in the future.

Final Thoughts

Put simply, the IRS is going to have taxpayers under close scrutiny. So, you need to be prepared. Whether you’re an individual taxpayer with a good salary package, a well-performing firm, or a high-net-worth individual, you’ve to maintain the transparency and accuracy of your financial statements. If you own and manage a transport business, it is best to invest in freight accounting to learn more.

Hire a certified public accountant to put your finances and taxes in the right shape before it gets late.

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