News & Insights
April 12, 2021
In its discretionary funding request for fiscal year (FY) 2022, the Biden administration is seeking an additional $1.2 billion for the IRS – a 10.4% increase over FY 2021. $900 million of the increase will be earmarked for compliance. The additional funding in the White House proposal would enable the IRS to “increase oversight of high-income and corporate tax returns,” according to a statement issued by U.S. Treasury Secretary Janet Yellen.
It is still early in the budget-making process so these numbers could change, but large corporations and high-income taxpayers should expect the federal budget for FY 2022 will include some amount of additional enforcement funding. We recommend a careful review of tax positions and records to prepare for a possible audit. It is likely that the IRS will continue receiving substantial increases for enforcement over the next several years, and large numbers of new auditors will be hired and trained to focus on high-income individuals, including the corporations, limited liability companies and other partnerships with which they are affiliated.
It is worth noting that the Corporate Transparency Act, passed in January 2021, will require the identification and registration of the ultimate individual owners (“beneficial ownership”) of most small businesses (corporations and limited liability companies). The information will be added to a federal database that will be shared with the IRS. The federal database will enable the IRS trace ownership through corporations, limited liability company and perhaps trusts to individual returns. The Financial Crimes Enforcement Network (FinCEN) recently published an Advance Notice for Proposed Rule with respect to “the implementation of the beneficial ownership information reporting provisions of the Corporate Transparency Act (CTA).” Written comments can be submitted to FinCEN by May 5, 2021.
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