The IRS now has enough money that it can hire more experienced workers to audit both companies and individuals, and it does not have to pick and choose among whom to audit, a managing director at Grant Thornton told attendees at AICPA & CIMA ENGAGE 2024 in Las Vegas.

“Gone are the days when they would hire folks right out of college, spend six months in some training program, then having spent six months holding somebody else’s hand in the field. And it’s a year before they’re doing anything useful for the agents,” said Dustin Stamper, who works in the National Tax Office of Grant Thornton in Washington, D.C., where he leads the tax legislative affairs practice.

The jobs posted on the IRS website offer higher pay than in the past, as the agency seeks to hire midcareer people who can hit the ground running, he said. “They’re filling out the ranks there, and this audit activity is going to hit pretty soon,” said Stamper, an enrolled agent.

Increased audit activity

Stamper gave a quick history of the political machinations that resulted in the IRS’s receiving

$60 billion over 10 years in addition to its annual appropriation. That is not the same as the original $80 billion allocated to the Service by the Inflation Reduction Act of 2022, P.L. 117-169, but it is still “an insane amount of money for the IRS. This is absolutely transformational,” he said Thursday at ENGAGE. “The IRS that you are dealing with today or dealt with last year is not the same IRS that you’re going to be dealing with in two to three years.”

That means the IRS now has the money and will have the staff to audit not just high-income individuals and partnerships, who will see the largest increases in examinations, but also others, such as C corporations, he said.

“This is enough money for the IRS where they don’t have to make tough decisions between priorities anymore,” Stamper said. “They don’t have to decide, ‘Oh, do I go after this or this? Do I prioritize this or this initiative?’ They have enough money now that they can say, ‘Yes, I’m going after this and this and this.’ … The audit activity is absolutely going up across the board.”

In early May, the IRS reported in its annual update to its Strategic Operating Plan that it had increased the number of revenue agents by about 9% over the prior year’s numbers.

IRS Commissioner Danny Werfel said in March that the Service has focused enforcement on high-income groups by serving notices to 125,000 people who have not filed a federal income tax return since 2017, including 25,000 with incomes over $1 million; conducting audits focused on the use of corporate jets; and collecting $520 million since mid-2023 in taxes owed by millionaires.

Issues the IRS is looking at

The IRS has telegraphed some of the issues that it will review in audit, such as research and development credits, Stamper said.

“That’s always something that they look at, but the IRS has been winning cases in the Tax Court and is feeling very confident, and they’ve got a lot of money to spend on this,” he said.

Other items that will catch the Service’s attention, Stamper said, include partner capital accounts, energy credits, and digital assets.

Stamper also predicted that IRS will use its new technology “to look at partnerships more holistically.”

“If you look over the last few years, it’s not just that they weren’t auditing all that many partnerships. It’s that they weren’t even finding stuff when they were there,” he said. “The no-change rate, from the IRS perspective, was pretty terrible. So, they want to do a better job of selecting the ones that are going to uncover issues. But once they’re in there, they’re not going to want to get out of there unless they find something, so I would be aware of that as well.”