IRS’ New Five-Year Plan Highlights Enforcement Priorities

On July 20, 2022, the Internal Revenue Service (IRS) published its Strategic Plan FY2022-2026. The IRS' new five-year plan highlights four primary goals, one of which is to “[e]nforce the tax law fairly and efficiently to increase voluntary compliance and narrow the tax gap.”

Reviewing the IRS’ Strategic Plan FY2022-2026 sheds light on the agency’s enforcement priorities for the foreseeable future. It provides some important insight into how the IRS plans to ramp up its enforcement efforts over the next five years as well.

What Are the IRS’ Enforcement Priorities Over the Next Five Years?

When identifying its enforcement priorities, the IRS looks both backward and forward. For example, when looking backward, the IRS notes that of the agency’s “direct investigative time spent,” 72 percent has been devoted to targeting the following tax-related offenses:

• Abusive tax schemes
• Corporate tax fraud
• Cyber crimes
• Employment tax fraud
• General tax fraud
• Identity theft
• International tax fraud
• Public corruption
• Refund fraud

These will remain priorities for the IRS in the years to come, as the agency plans to “[s]upport optimization of the collection process to best secure payment from non-compliant taxpayers.” With this in mind, individual and corporate taxpayers will be well-served to reexamine their compliance efforts and proactively address any outstanding issues that have the potential to trigger IRS scrutiny.

With regard to looking forward, one particular point of note is that the IRS is seeking to increase its enforcement resources based, in part, on the substantial volume of COVID-19 relief fraud that the agency is investigating with its federal law enforcement partners. This sends a clear signal that the IRS is anticipating this high volume will persist in the years to come.

Cryptocurrency tax compliance is a forward-looking priority for the IRS as well. In its Strategic Plan FY2022-2026, the IRS specifically notes that it will be devoting new resources to “updating necessary tax guidance for new investments and income avenues (for example, cryptocurrencies and gig work), and investing in analytical approaches that improve non-compliance identification and case selection.”

How Will the IRS Be Enhancing Its Enforcement Capabilities?

In order to achieve its enforcement goals over the next five years, the IRS’ Strategic Plan FY2022-2026 indicates that the agency will be investing its resources in several key areas. Some examples include:

• “Deploy[ing] advanced technologies to analyze and identify patterns of non-compliance and facilitate appropriate case selection;”
• “Enhance[ing] predictive analytics to provide potential recommendations for taxpayer actions or treatments using aggregated case data;” and,
• “Strengthen[ing] the deterrent effect by increasing our community presence and audit coverage, especially for cases with a high risk of non-compliance.”

To avoid liability in IRS audits and investigations, taxpayers will need to be prepared to address the IRS’ new technology-driven enforcement tactics. This includes not only maintaining tax law compliance but also thoroughly documenting compliance and being prepared to justify disparities between taxpayers’ individual filings and the IRS’ predictive models and aggregated data.

Need Help Dealing with the IRS? Contact Thorn Law Group in Boston

If you are facing IRS scrutiny in Boston, the lawyers at Thorn Law Group can help you avoid unnecessary consequences. To schedule a confidential consultation with Kevin E. Thorn, Managing Partner of Thorn Law Group, call 617-692-2989, email ket@thornlawgroup.com or contact us online today.