IRS Budget for 2014 Focuses on Increasing Manpower to Ensure Tax Compliance

The ramifications of the sequester may have an impact on the Internal Revenue Service’s ability to effectively audit potential tax law violators. In response, the agency is shoring up its 2014 budget to avoid auditing and compliance disruptions. According to Fox Business, the IRS will decrease its customer service departments and operations by 1 percent and instead redistribute its funds to manage the high incidence of tax evasion and tax avoidance carried out by individuals, offshore account holders, and businesses. Data from the Treasury Inspector General for Tax Administration reveals that the IRS requested a budget of $12.9 billion in 2014, a $1 billion increase from its operating budget in 2012. The request reveals that breakdown of the additional $1 billion, with the majority of the funding going toward increasing full-time staff to 4,572 full-time workers. The agency also plans to increase its enforcement by 6.93 percent and its operations support by 13.51 percent. Fox Business reports that the IRS’ budget increases, if approved, will largely be used in an attempt to close the federal tax gap, which ballooned to $450 billion in 2006, from $345 billion in 2001. Despite the potential budget increase, the agency noted recently that the furloughs and sequestration ramifications may force it to tone down audits of corporations and focus its attention on less costly investigations of high net-worth individuals and small business owners. To help make up for the budgetary shortfalls, the agency has expanded a number of voluntary programs – including its Offshore Voluntary Disclosure Program and its Voluntary Classification Settlement Program relating to misclassified workers – to encourage more lawbreakers to come forward before an investigation is launched. In addition, the IRS is working with several foreign countries to share account information of American offshore account holders in an effort to detect hidden income or misrepresented earnings.