The IRS has released details of its FY 2013 budget request. The current request is approximately $12.8 billion, representing about an 8% increase over 2012.
One of the primary focuses of the FY 2013 budget is increased enforcement. The budget includes $403 million in new IRS enforcement activities, which are expected to raise $1.48 billion annually by FY 2015. In addition to the 4.3-to-1 direct return that the IRS expects to achieve on its enforcement investment, the IRS estimates that the deterrence value of these activities will be at least three times the direct revenue impact. Translation — Once you see what the IRS does to your friends and neighbors, you will think twice before you cheat on your taxes!
The budget also includes $200 million in additional examination and collection programs, which are expected to raise more than $1.1 billion by FY 2015. The IRS believes these investments are especially important to further the IRS’ mission of improving tax compliance.
While some of the enforcement increases represent IRS efforts to recover from reductions in funding over the past two years, the IRS is clearly turning its focus toward enforcement, with the goal of increasing both compliance and revenue.
What does this mean for most taxpayers? I would expect to see a trend of increasing examinations and more focused (i.e. more aggressive) collection efforts. While we will have to wait and see what the full impact of these increased activities will be, it definitely looks like the IRS is looking to put the “teeth” back into its enforcement efforts.