For years, the IRS has been a fundamental part of the U.S. government's ability to collect revenue and ensure compliance with tax laws. However, the agency’s efforts to close the tax gap—the difference between taxes owed and taxes collected—have recently seen a dramatic shift. This change is driven by aggressive enforcement tactics and unprecedented financial investment aimed at bolstering the IRS's ability to collect outstanding taxes. The influx of funding and advancements in technology and data analytics means we are entering an era of far more aggressive IRS collection efforts.
At V Tax Services, we understand that this increase in enforcement can be intimidating for taxpayers. The good news is that various IRS Relief options are available to help individuals and businesses navigate these changes. In this blog, we will explore how aggressive the IRS collection efforts have become, outline how much money has been and will be invested in the agency, and discuss how IRS Relief programs can provide a pathway to resolving tax debts.
The Current State of IRS Collection Efforts: Becoming More Aggressive
A Renewed Focus on Enforcement
The IRS has always been responsible for collecting taxes, but recent years have seen a significant shift toward more aggressive collection tactics. This shift is primarily driven by an effort to close the tax gap, which, according to IRS estimates, amounts to hundreds of billions of dollars annually. The IRS uses traditional and modern methods to ensure compliance and collect unpaid taxes.
Key areas where the IRS has stepped up its enforcement include:
Automated Notices: The IRS has increasingly relied on its Automated Underreporter (AUR) Program to catch discrepancies between taxpayers’ reported income and third-party information (such as W-2s or 1099s). Notices like the CP2000 and CP2501 are routinely sent to taxpayers when the IRS detects unreported income or mismatches between filings and data received from employers or financial institutions.
Wage Garnishments and Levies: The IRS can garnish wages or levy bank accounts when taxpayers fail to comply with tax payment requirements. These actions are becoming more common as collection efforts intensify.
Tax Liens: The IRS can place a lien on a taxpayer's property, making it difficult to sell or refinance assets until the tax debt is paid. The IRS is expected to use this tactic more frequently with increased funding.
These collection actions are often swift and can be financially devastating if not addressed promptly. Therefore, understanding the IRS Relief options available to you is crucial for mitigating the impact of these aggressive tactics.
The Financial Investments Driving This Aggression
The IRS's capacity for aggressive collection has been significantly enhanced by recent and future investments aimed at modernizing the agency and expanding its enforcement capabilities. Two key pieces of legislation have played a critical role in this transformation: the American Rescue Plan (ARP) and the Inflation Reduction Act (IRA).
The American Rescue Plan (ARP)
Passed in 2021, the American Rescue Plan injected much-needed funds into the IRS. The funding was allocated to modernize the agency’s technology infrastructure, improve customer service, and expand its enforcement capabilities. The IRS, struggling with outdated systems and reduced staffing, used this windfall to begin catching up on a backlog of tax returns and audits, particularly those delayed during the COVID-19 pandemic.
This initial investment laid the groundwork for the agency’s more aggressive collection stance, but it was only the beginning.
The Inflation Reduction Act (IRA)
The Inflation Reduction Act of 2022 represents the most significant financial investment in the IRS in modern history. The IRA allocated $80 billion to the IRS over the next decade—a move designed to revamp the agency’s enforcement efforts, modernize technology, and enhance taxpayer services.
Breakdown of the $80 Billion Investment:
Enforcement: Approximately $45.6 billion of the IRA’s funding is earmarked specifically for enforcement activities. This includes hiring thousands of new IRS agents tasked with conducting audits, investigating tax evasion, and pursuing delinquent taxpayers. This portion of the funding aims to increase the number of audits and collections, mainly targeting high-income earners and large corporations.
Technology Modernization: Around $25 billion of the funding is designated for upgrading the IRS’s aging technology infrastructure. These upgrades include new data analytics tools, artificial intelligence, and automated systems that will make the IRS more efficient in identifying non-compliance and pursuing collections. The IRS will be able to cross-reference taxpayer data more effectively, flagging discrepancies and unpaid taxes more accurately.
Taxpayer Services: The remaining funds are allocated toward improving customer service, including hiring additional staff to handle calls and inquiries. This is aimed at making it easier for taxpayers to voluntarily comply with tax laws, reducing the need for aggressive enforcement actions.
The Biden administration has emphasized that the increased enforcement efforts will primarily focus on high-income individuals and corporations. However, the influx of funding and modernization means taxpayers across all income levels can expect more scrutiny and more rapid enforcement actions if they fail to comply.
Future Projections: What Can Taxpayers Expect?
With the IRS receiving unprecedented funding, the agency’s collection efforts are expected to become even more aggressive in the coming years. Here’s what individuals and businesses need to keep in mind as the agency scales up its operations:
1. Increased Audits
One key area where the IRS plans to expand its efforts isauditing. Historically, audit rates have been relatively low, particularly for high-income earners and large businesses. However, with the additional funding, the IRS is expected to ramp up audits across the board. This means that taxpayers who have complex returns, significant income, or operate cash-intensive businesses may find themselves under increased scrutiny.
The IRS will also use its enhanced technology to identify discrepancies and flag returns for audits better. This could result in more automatic audits triggered by data mismatches or underreporting of income.
2. More Aggressive Collections and Enforcement
The IRS’s expanded budget includes significant investments in collections. Delinquent taxpayers—those who owe back taxes or have failed to file returns—can expect to face more aggressive enforcement actions such as:
Wage Garnishments: The IRS can garnish wages without a court order if a taxpayer fails to make arrangements to pay their tax debt. With additional resources, the agency will be able to process more garnishments.
Bank Levies: If a taxpayer fails to respond to collection notices, the IRS can levy bank accounts, seizing funds directly to satisfy unpaid tax debt.
Liens and Property Seizures: The IRS can place liens on homes, vehicles, and other assets to secure payment of tax debts. In more extreme cases, the agency may even seize property.
These enforcement tools will be used more frequently as the IRS expands its workforce and enhances its data collection capabilities.
IRS Relief: Navigating Aggressive Collection Efforts
While the IRS is becoming more aggressive in its efforts to collect unpaid taxes, it’s important to remember that several IRS Relief options are available to help taxpayers manage their tax obligations. At V Tax Services, we specialize in helping individuals and businesses navigate these relief programs to resolve their tax issues and avoid severe enforcement actions.
1. Installment Agreements
One of the most common forms of IRS relief is an Installment Agreement, which allows taxpayers to pay off their tax debt in smaller, more manageable monthly payments. This can help prevent more aggressive actions like wage garnishments and bank levies. At V Tax Services, we can help you negotiate a payment plan that fits your financial situation.
2. Offer in Compromise (OIC)
An Offer in Compromise allows taxpayers to settle their tax debt for less than the total amount owed, provided they can demonstrate financial hardship. However, qualifying for an OIC is difficult, as the IRS has strict eligibility criteria. Our experts at V Tax Services can help you navigate the process and submit a successful offer.
3. Currently Not Collectible (CNC) Status
If you are facing severe financial hardship, you may qualify for Currently Not Collectible (CNC) status, which temporarily halts all IRS collection actions. This status provides immediate relief from garnishments, levies, and liens, giving you time to improve your financial situation.
4. Penalty Abatement
You may be eligible for penalty abatement if you’ve accrued significant penalties for failing to file or pay your taxes on time. The IRS offers relief from specific penalties if you can show reasonable cause for non-compliance, such as illness or a natural disaster. V Tax Services can help you present your case and request penalty abatement.
Conclusion
The IRS is becoming increasingly aggressive in its collection efforts, driven by massive financial investments to modernize the agency and expand its enforcement capabilities. With $80 billion in new funding over the next decade, the IRS is poised to significantly increase audits, pursue delinquent taxpayers more aggressively, and implement advanced data analytics to identify non-compliance.
For taxpayers, this means increased scrutiny and a higher likelihood of facing enforcement actions. However, there are several IRS Relief options available to help you manage your tax debt and avoid severe consequences. At V Tax Services, we specialize in helping individuals and businesses resolve their tax issues and secure the best possible outcome in an increasingly aggressive IRS environment.
Don’t wait until your tax problems escalate—contact V Tax Services today to schedule your consultation and explore your options for IRS Relief.
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