A significant portion of the $80 billion scheduled to be invested in IRS upgrades is earmarked to “increase tax compliance among wealthy taxpayers and businesses,” according to the IRS’ plan. Indeed, the IRS is investing upwards of $47 billion toward enforcement efforts. This amount towers over the next largest item on its spending plan, just over $12 billion for technology enhancements.

Little doubt remains that your high-income earning clients can expect more oversight and less room for error. This reality may be of concern to attorneys, accountants and financial advisors responsible for helping their clients adhere to the tax laws with integrity.

If you would like to dig into the details about the IRS’ newly-secured tens of billions of dollars, you can peruse the agency’s Inflation Reduction Act Strategic Operating Plan submitted in April by IRS Commissioner Daniel I. Werfel. The 150-page plan covers years 2023 to 2031 and speaks primarily to five areas of priority spending:

  • $47.4 billion to increase tax compliance among wealthy taxpayers and businesses.
  • $12.4 billion for technology enhancements.
  • $8.2 billion to recruit and retain a highly-skilled, diverse workforce.
  • $7.5 billion targeting taxpayer service improvements.
  • $3.9 billion for cybersecurity.

Significant operational efficiencies are anticipated, and the heightened compliance efforts will generally apply to taxpayers making more than $400,000 annually. What is raising eyebrows is that high-income earners and the financial professionals who serve them should likely expect more in terms of oversight and audits. According to the plan, taxpayers with complex issues and returns, commonly seen among large partnerships and corporations, high-income earners, and high-wealth individuals, will be primary areas of focus. The new hire ramp-up and technology implementation will take some time.

Of specific importance to the charitable community is the portion of the plan that states: “The IRS will increase enforcement activities to help ensure tax compliance of high-income and high-wealth individuals.” Alongside the enhanced scrutiny is the increasing need for solid charitable planning advice for your high net-worth clients. KZCF is an ideal partner, offering secure and efficient vehicles for charitable giving—including the precise tax documentation and compliance that the IRS expects.

Indeed, a silver lining for advisors and their clients who work with KZCF may be the fact that the added IRS oversight plays to KZCF’s strengths. By offering donors vetted grantee organizations, gift execution, comprehensive documentation and compliance services, your clients who have established Donor Advised Funds, Field-of-Interest Funds, Designated Funds or other funds through KZCF can rest easy knowing their philanthropic endeavors are being handled with precision and intentionality.