During the Biden administration era — the focus of the IRSs attention was simple:
“Have the wealthy pay their fair share.”
If you’ve been wondering whether the IRS was listening and cracking down on wealthy taxpayers, the answer is a resounding YES. The latest report from the Treasury Inspector General for Tax Administration shows a major shift in audit focus and what it means for high-income earners like you.
Background: IRS Funding and Enforcement Changes
The Inflation Reduction Act of 2022 gave the IRS a $79 billion funding boost, with over $45 billion earmarked for enforcement. The agency hired approximately 80,000 new auditors with the goal of targeting high-income taxpayers.
Although Congress later cut enforcement funding to $3.8 billion by 2025 and staffing decreased by roughly a third, IRS directives remain clear: audits of taxpayers under $400,000 should not increase, while audits targeting wealthier individuals have intensified.
This may seem like a contradiction to my post: Trump Administration Cuts 7% Of The IRS Workforce
It’s important to remember that the IRS is a massive organization and it (usually) doesn’t change direction overnight. The recent shift toward auditing high-income taxpayers only became clear after the data was released, so it shouldn’t really surprise anyone paying attention.
The real question now is whether this focus will change again, especially under the new Trump administration. For business owners and high earners, staying informed and prepared is the only way to navigate these shifts. Only time will tell.
IRS Audit Trends in 2024
In 2024, overall audits fell from an average of 481,000 per year (2019–2023) to 420,500 — which indicates a ~12% drop. Taxpayers under $400,000 experienced a 22% decline in audits, from 452,000 to 354,000 annually.
But for those earning over $400,000, audits more than doubled, jumping from 29,000 to over 70,000 per year, an almost 250% increase. I guess Biden’s message was heard loud and clear.
This data shows a clear message: IF you’re a high-income taxpayer, the IRS started focusing on your returns.
How the IRS is Shifting Focus
The Small Business/Self-Employed Division and the Large Business/International Division have redirected audits toward high-income taxpayers. In the large business sector, more than 60% of audits now focus on individuals earning over $400,000, compared to a historical average of 40%.
Overall, 17% of all audits in 2024 were for high-income earners—up from just 6% in previous years.
So what is the overall takeaway here? Well, my opinion is that compliance and tax-planning just became even more important. Wealthy taxpayers and owners of partnerships, corporations, or multiple rental properties should be especially vigilant.
Areas of Uncertainty
Despite the IRS’s sharper focus, some rules remain unclear. There’s no official definition of what counts as a “small business,” though some sources suggest less than $10 million in assets.
Married couples filing jointly may be disadvantaged under the $400,000 threshold unless they file separately. Outdated systems and data tracking challenges mean that IRS enforcement is still evolving.
Both the Biden and Trump administrations (yes, even DOGE) recognized that the IRS has lagged in technology. This new report may be highlighting an increased reliance on tech to tackle complex tax issues. Maybe, just maybe, it’s a sign the IRS is finally catching up.
What High-Income Taxpayers Should Do
If you earn over $400,000 or have complex tax filings, I would consider the following strategies:
- Review the last three years of your tax returns to avoid errors that could trigger audits.
- Ensure your business books are accurate, organized, and fully documented.
- Avoid transactions or filings that could flag aggressive tax positions, such as listed transactions or trader status.
- Work with a qualified tax professional who understands the latest IRS rules and audit trends.
Always remember: what we are talking about here (mainly) is tax compliance. This is the first step towards (legally and ethically) paying less in taxes. Only when your compliance is rock-solid should you look into trying to utilize the tax code for savings and strategies.
What This Means for the Average Taxpayer
If you earn less than $400,000, audit risk has decreased. IRS audit starts fell by close to 20% in 2024, providing some relief to mid-income earners. High-income taxpayers, however, are now under increased scrutiny, making it essential to stay proactive and prepared.
You can access the full TIGTA report here: Treasury Inspector General for Tax Administration – IRS Audit Strategy Report.
Key Takeaways
The IRS is auditing smarter and focusing more aggressively on high-income taxpayers. While the rules are still evolving, proactive planning, careful documentation, and professional guidance are essential to avoid triggering audits and ensure compliance.
If you want a second opinion on your own situation… I’m here to guide you through the maze of taxation and compliance.
Welcome to the New Age of Accounting. Let’s begin.
P.S. If you found this article helpful, you’ll love my new book S-Corp Mastery: How Smart Business Owners Maximize Tax Savings & Build a Lasting Legacy. It’s now live and available in a sleek, easy-to-read PDF version. Grab your copy here
Chris is the Managing Partner at Weston Tax Associates, a best-selling author, and a renowned tax strategist. With over 20 years of expertise in tax and corporate finance, he simplifies complex tax concepts into actionable strategies that drive business growth. Originally from Sweden, he now lives in Florida with his wife and two sons.
