On 28 April 2021, the United States (US) Treasury Department issued a press release detailing the Government's plan to increase resources to the Internal Revenue Service (IRS) in order to improve tax compliance.
According to the release, President Joe Biden proposes to direct US$80 billion to the IRS over the next 10 years to: (i) improve technology; (ii) increase the hiring and training of auditors to focus on complex investigations of large corporations, partnerships and global high-wealth individuals; and (iii) increase enforcement against high-income individuals.
"The IRS requires more resources to conduct investigations into underreported income and to pursue high-income taxpayers who evade their tax liability through complex schemes," according to the release.
Treasury expects these changes to result in US$700 billion in tax revenue over the next 10 years.
Treasury also said it wants the IRS to implement a mechanism for cross-checking the accuracy of tax filings from "opaque sources," such as partnerships and proprietorships. Treasury said it will leverage "the information that financial institutions already know about account holders, simply requiring that they add to their regular, annual reports information about aggregate account outflows and inflows."
Implications
While implementation of all facets of the plan will take time, corporations, high-wealth individuals and partnerships may want to prepare for the possibility of increased audits. The proposed information reporting would provide IRS with significant additional data points that will enable IRS to more accurately target potential underreporting and other noncompliance.
For additional information with respect to this Alert, please contact the following:
Ernst & Young LLP (United States), International Tax And Transaction Services – Transfer Pricing, Washington, DC
- Ryan J. Kelly
- Heather Gorman
Ernst & Young LLP (United States), Tax Policy and Controversy, Washington, DC
- Kirsten Wielobob
For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.
