$80 Billion IRS budget increase
and why should we care up here in the North
The new US bill, part of Joe Biden’s agenda, calls for $80 billion funding for the IRS over the next 10 years, engaging 87,000 new auditors. At least 50% of this funding will be focused on enforcement and audits, and obviously subject taxpayers across the income spectrum to more scrutiny – but who is most likely to be audited?
While the dems claim that the increased IRS enforcement will focus on corporate and high-net-worth tax dodgers, history and our common sense warns this may not be the case.
According to a recent study, 54% of the correspondence audits initiated by the IRS in 2021 targeted low-income workers with gross income under $25,000 who claimed the earned income tax credit, an anti-poverty measure. Another analysis concluded that households with less than $25,000 in earnings are five times more likely to be audited than everyone else. Taxpayers with a total income between $200K to $1M had were one-third less likely to be audited than the low income earners.
Well that is a pretty bleak image of tax fairness in the US, and it circles around the eternal issue that the poor just get poorer while high-income taxpayers ride the loopholes of complex investments to cover the gaps between taxes owed and paid vs. taxes reported and paid.
The question is, why should we – North of the border – care? As Canada is tied to the US by an umbilical cord, we seem to mimic the US economy to a T with a few months delay. You don’t need a crystal ball to predict the future, just peek over the fence Southbound. By talking to the CRA day in and day out, we know they have also increased funding for their enforcement programs, and they will continue ramping it up. We can only hope that their target is multimillion dollar big tech and high profile investments
Bottom line is, don’t wait for it. If you haven’t filed your taxes, it’s just a ticking time bomb you don’t want to wait to explode. The Voluntary Disclosure Program – if you qualify – grants relief of interest and penalties IF you come forward before they knock on your door. Well, if they knocked on your door but you weren’t at home, you may still qualify for the VDP. Call us to explore if this is a good option for you.
Written by: Christa Lazar