IRS’s Most Wanted: The $200,000 Man

Sixty-three percent of new audits last year were aimed at middle-class filers

WSJ editorial.

"The Internal Revenue Service got an audit of its own in time for Tax Day, and two irregularities jump out. President Biden’s plan to hire a new army of tax collectors is falling flat, and the agents already at work are targeting the middle class.

Those are two findings of the IRS’s watchdog, the Treasury Inspector General for Tax Administration (Tigta). The report examines IRS progress on mandates from the Biden Administration backed by tens of billions in new funding. The first supposed goal was to audit more ultrawealthy and fewer middle-class filers, but it’s not going so well.

By last December the IRS decided that it wouldn’t begin tracking its progress until later this year. That’s because the agency has been slow to shift its focus to high-income taxpayers, who make up a small share of total filings. Its April 2023 strategic plan pledged that future audits would disproportionately target individuals making at least $400,000, but “did not include specifics on how the IRS was going to ensure it met this commitment,” says Tigta.

The most recent data suggests the IRS is still focused on the middle class. As of last summer, 63% of new audits targeted taxpayers with income of less than $200,000. Only a small overall share reached the very highest earners, while 80% of audits covered filers earning less than $1 million. Don’t forget to save those charitable-giving receipts.

Sluggish hiring might explain the slow shift. To its credit, the IRS never claimed it would decrease its middle-class audits, only that audits on higher-earners would become a majority. A fleet of new agents were supposed to turn their sights on rich tax dodgers. But apparently the job is in scarce demand. 

Tigta reports that revenue-agent recruitment is “far below” the agency’s target, and it hired only 34 in the first six months of its expansion, according to trade publication Government Executive. That compares with its goal of 3,700 in the first year.

The agency faces the same tight labor market as any other employer, but the job specs aren’t bad. A typical salary for these agents is about $125,000, plus public-employee perks such as up to $60,000 in student-loan forgiveness. But for one reason or another, America’s treasurers and accountants aren’t lining up to become federal tax collectors.

All of this should encourage the House Republicans working to claw back more of the $80 billion that Democrats funneled to the IRS. For all that new money, Congress is so far getting the same old agency."