Despite the Biden administration’s assertion that the Internal Revenue Service (IRS) would increase audits on the ultra-wealthy and reduce scrutiny on middle-class taxpayers, recent data indicates otherwise. The Wall Street Journal’s editorial board highlighted that as of summer 2023, 63% of new IRS audits targeted individuals earning less than $200,000. This data underscores a continued focus on middle-income earners, contradicting Biden’s promises.
The Inflation Reduction Act, a key legislative achievement of the Biden administration, includes provisions to hire 87,000 new IRS agents at a total cost of $80 billion. While this move was intended to bolster enforcement against high-income tax evaders, the primary impact has been on those earning below $200,000 annually. According to the Transactional Records Access Clearinghouse (TRAC) at Syracuse University, this group remains the most frequently audited, with 67% of audits falling on these taxpayers.
The figures paint a stark picture: middle-class taxpayers are still bearing the brunt of IRS audits. Despite assurances that the new resources would target the ultra-wealthy, the agency has yet to make significant inroads in this area. The Treasury Inspector General for Tax Administration (TIGTA) has noted that the hiring and deployment of revenue agents and specialists focused on large corporations and high-income individuals have been slow to materialize. In short, the IRS has not yet hired agents with the expertise to perform complicated audits.
To provide some reassurance, after the legislation was signed into law, Treasury Secretary Janet Yellen emphasized the Biden administration’s dedication to avoiding increased audits on low- and middle-income taxpayers. In a letter to IRS Commissioner Charles Rettig in August, she stated, “I direct that any additional resources – including new hires and auditors – should not be used to raise the audit rates for small businesses or households earning below $400,000 compared to historical levels.”
A May 2022 report from the Government Accountability Office showed that historically, lower-income taxpayers have experienced audit rates above the average. Additional data from fiscal year 2021 indicates that individuals earning less than $25,000 annually were audited at a rate five times higher than those with high incomes.
For middle-income earners, this means continued scrutiny. The so-called “$200,000 man” remains a prime target for IRS audits, questioning the narrative that the Biden administration’s IRS expansion would primarily address tax evasion among the wealthy. The reality is that the majority of new audits still affect those making less than $200,000, while the ultra-wealthy largely avoid increased IRS attention.
When House Republicans regained the majority in 2022, they unanimously voted to repeal the funding for the 87,000 IRS agents.
