As tax authorities soak up billions of dollars in funding to strengthen top-level tax compliance, the Internal Revenue Service has no specific plan for how many more audits it will impose on wealthy taxpayers and companies. It's starting to happen.
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The IRS said in a report Thursday that it wants to increase the audit rate by 50% for households with incomes of $10 million or more by the time people file their 2026 taxes. It also aims to nearly triple the rate of corporate audits.
The latest final audit figures have already begun to show a slight rise in audit rates for wealthier households, but the newly announced target will result in a significant rise.
Still, the agency said the increase would return its “coverage rate” (meaning the percentage of taxpayers covered) to where it was more than a decade ago, before funding shortages and staff declines occurred.
IRS Commissioner Danny Wuerffel told reporters there are no plans to increase audits of households with incomes under $400,000. “They remain at historically low levels,” he said.
Amid the fight in Congress over funding for the Inflation Control Act, the Treasury Department issued an order in 2022 directing the IRS not to increase audit rates below that threshold of $400,000.
Instead, the focus should be on the top of the income distribution, which the IRS says it's looking at.
The agency announced Thursday that it wants to audit 16.5% of 2026 earnings for households with total positive income of at least $10 million. According to 2019 tax return numbers, the IRS audited 11% of returns in this rare income band and recommended that these households pay a total of about $144 million in additional taxes.
For the 2026 tax year, more than 22% of income tax returns from companies with at least $250 million in assets will be audited, according to the IRS' plan. In contrast, the 2019 return had a coverage ratio of less than 9%.
These goals are part of an ongoing effort to demonstrate what the IRS is doing to maximize the billions of dollars provided by the Inflation Control Act. The 2022 bill was passed by the Democratic-controlled Congress.
The Inflation Control Act allocated $80 billion to the IRS over 10 years, but after the law was enacted, Republicans in Congress restored that amount to about $60 billion.
The IRS is also emphasizing its efforts to advocate for stable funding levels over the long term, including funding proposed in President Joe Biden's 2025 budget.
Back in 2022, the fight in Congress over $80 billion in additional IRS funding included Republican claims that the IRS would rapidly grow its ranks.
“This report should dispel some persistent myths about the supersized IRS,” Werfel said. The IRS currently has about 90,000 full-time employees, up from about 79,000 in fiscal year 2022, he noted.
The ultimate goal is to have about 102,500 employees by the end of the century, Werfel said. “We believe this number represents an appropriately sized IRS,” he said.
When lawmakers passed the Inflation Control Act, the IRS had about 8,400 revenue employees. Werfel said the number of employees is increasing, but does not include people who have job offers but have not yet officially joined the company.
Auditing is part of tax enforcement. The IRS said it has already collected more than $500 million from wealthy families with unpaid tax debts and unfiled tax returns.
The IRS recently sent more than 125,000 notices of unfiled tax returns to households making at least $400,000.
Werfel said Thursday it was too early to say what the early results would be. “I know our phones started ringing with questions,” he said.
