TIGTA Critical of IRS Training of Revenue Agents Examining High-Income Taxpayers

The Treasury Inspector General for Tax Administration is calling on the Internal Revenue Service to improve its training of revenue agents that will be focused on auditing high-income taxpayers.

In an August 31, 2023, report, the Treasury Department watchdog noted that despite receiving supplemental funding from the Inflation Reduction Act that has been earmarked, in part, to increase examination of high-income taxpayers, the “IRS’s efforts to train new hires do not appear to be fully leveraging” the expertise it has within the Large Business and International Division.

“The IRS treats this training as specialized and only offers it when necessary for employees auditing in this specialized area,” that current continued, recommending that with the new IRA funding, “the IRS should revise its training paradigm and expose new hires to the types of issues associated with high-incometaxpayer returns.”

TIGTA also criticized the agency for not having“a unified or updated definition for individual high-incometaxpayers,” noting that“current examination activity code schema still uses $200,000 as the main threshold” as established in the Tax Reform Act of 1976. This threshold exists even as the IRS continually uses $400,000 as the income threshold, with the population underneath it not expecting to see a rise in audit rates against historical levels from a decade ago.

“The IRS’s Inflation Reduction Act Strategic Operating Plan sets forth leveraging data analytics to improve the IRS’s understanding of the tax filings of high-wealth individuals and to address potential noncompliance,” the report states. “Consequently, the IRS needs to update its high-incometaxpayer definition to better identify and track examination results and manage examination priorities.”

IRS in its response to the TIGTA findings, published in the report, did not agree with the recommendation related to the definition of high-income taxpayers, stating that “a static and overly proscriptive definition of high-incometaxpayers for the purposes of focusing on income levels above which taxpayers have unique and varied opportunities for tax would serve to deprive the IRS of the agility to address emerging issues and trends.”