IRVINE, Calif., June 8, 2023 /PRNewswire/ -- In April 2023, the Internal Revenue Service (IRS) revealed a new $80 billion plan to reform its tax collection practices. The agency seeks to transform itself into a "digital first" tax collector with improved customer service and an enhanced ability to crack down on tax crimes. This effort is a part of the Biden administration's plan to reduce uncollected tax debts and use the funds to address other socioeconomic issues like prescription drug prices and climate change.

The plan unveiled by the IRS suggests that they aim to become a "digital first" organization that offers "world class" service to American taxpayers. The agency seeks to introduce more machine-learning technology and data analytics to catch tax evaders. Furthermore, the IRS will hire more revenue agents and tax attorneys to help audit complex business partnerships and corporations. If you suspect you might have committed an error on your tax returns, you should consider making a voluntary disclosure to avoid criminal prosecution.

For help with your tax issues, reach out to our experienced Dual-Licensed Tax Lawyers & CPAs at the Tax Law Offices of David W. Klasing by calling (800) 681-1295 or clicking here to schedule a reduced rate initial consultation.

Overview of the IRS's New Plan

As part of the Inflation Reduction Act of 2022, the IRS is being infused with $80 billion to help improve customer service and enhance their ability to catch tax evaders. This is the largest single infusion of funds in the agency's history and lays the groundwork for a 10-year overhaul of this highly scrutinized arm of the federal government.

A primary goal of this new plan is to reduce our nation's $7 trillion of uncollected tax revenue. More than half of the money allocated for this plan will be utilized to ensure that large corporations and rich investors cannot escape their tax obligations. The Biden administration states that they intend to use the increased tax revenue to address other pressing issues like climate change, costly prescription drugs, and various other initiatives prioritized by Democrats.

This new plan will purportedly result in hundreds of billions of dollars of deficit reduction. Antiquated technology will be replaced, and new systems will be introduced that allow taxpayers easier access to their financial information, enhanced communication with the IRS, and additional ways to correct errors on their tax returns. The agency will implement more machine-learning technologies and data analytics to catch tax evaders.

Furthermore, under the new plan, new teams of revenue agents and tax attorneys will be hired to keep the IRS from becoming overwhelmed when auditing complex business partnerships and corporations. The Treasury Department has asserted that the new funds infused into the IRS will lead to the hiring of 87,000 new employees over the next 10 years. However, it has been suggested that that number could reach as high as 110,000. The IRS does not want to become locked into hiring requirements before learning how their new technologies will affect their staffing needs. Regardless, the agency's ability to enforce tax regulations will be greatly enhanced.

Criticisms of the IRS's New Plan

Treasury Secretary Janet Yellen has stated that under the new plan, audit rates for taxpayers making less than $400,000 per year will not rise. However, the new plan has been met with doubt and criticism, especially from Republican lawmakers.

Janet Holtzblatt is a senior fellow at the Urban-Brookings Tax Policy Center. She states that it will be challenging for the IRS to determine whether taxpayers who reported an income of less than $400,000 did so legitimately. Accordingly, Holtzblatt asserts that the agency will need to determine an acceptable audit rate for those under that specific income level.

Republic congressmen are concerned that the plan will actually result in the unfair persecution of middle-class Americans. They have suggested that this new plan enables the IRS to hire thousands of "armed agents" to go after small businesses and middle-class taxpayers. Mike Kelley, a representative from Pennsylvania, states that the Democrats are "weaponizing the most feared agency in the federal government." Meanwhile, Erin Collins, a national taxpayer advocate, has argued that the new funds allocated for the plan are disproportionally invested in enforcement. Finally, the governor of South Carolina, Nikki Haley, has questioned, "Does anyone believe that the IRS won't go after middle America?"

IRS Voluntary Disclosure Program

If you have a history of committing tax crimes, there are generally three courses of action that you can choose from. First, you can do nothing and hope that the IRS will not catch you. Obviously, this strategy is very risky and may result in you facing criminal penalties like expensive fines and jail time. Second, you may amend your prior tax returns. Amending your prior returns is a form of "quiet disclosure" and can be viewed as a criminal admission.  It does not take a genius to compare the original return to the amended returns and ask the very dangerous "why" questions.   Why was income underreported on the original returns? Why were deductions overstated on the original returns?   Why were credits claimed on the original returns that the taxpayer was not entitled too? 

The problem with making a quiet disclosure is that if your errors are detected and you are prosecuted, you will most likely be in an exponentially worse position than if you had come forward under the federal voluntary disclosure program. Entering the voluntary disclosure program is the third option that you may consider if you suspect you committed a tax crime.

The IRS voluntary disclosure program allows taxpayers with previously criminally evaded income tax to reach out to the IRS and resolve their tax issues without facing criminal tax prosecution. By voluntarily disclosing prior intentional misstatements you may have made on your returns, you may be able to avoid criminal tax prosecution.

Voluntary disclosures must be made before the IRS initiates a civil examination or criminal tax investigation against you. Furthermore, these disclosures must also be made before the IRS receives information about your improper behavior from a third party.

In order to enter into the voluntary disclosure program, you must hire a tax attorney that will get in touch with the IRS Criminal Investigation Office on your behalf. Having competent legal representation on your side in invaluable when seeking to navigate the complicated program.

If you have failed to file a tax return for one or more years or have taken a position on a tax return that could not be supported upon an IRS or state tax authority audit, eggshell audit, reverse eggshell audit, or criminal tax investigation, it is in your best interest to contact an experienced tax defense attorney to determine your best route back into federal or state tax compliance without facing criminal prosecution.

Note:  As long as a taxpayer that has willfully committed tax crimes (potentially including non-
filed foreign information returns coupled with affirmative evasion of U.S. income tax on offshore income) self-reports the tax fraud (including a pattern of non-filed returns) through a domestic or offshore voluntary disclosure before the IRS has started an audit or criminal tax investigation / prosecution, the taxpayer can ordinarily be successfully brought back into tax compliance and receive a nearly guaranteed pass on criminal tax prosecution and simultaneously often receive a break on the civil penalties that would otherwise apply. 

It is imperative that you hire an experienced and reputable criminal tax defense attorney to take you through the voluntary disclosure process.  Only an Attorney has the Attorney Client Privilege and Work Product Privileges that will prevent the very professional that you hire from being potentially being forced to become a witness against you, especially where they prepared the returns that need to be amended, in a subsequent criminal tax audit, investigation or prosecution.

Moreover, only an Attorney can enter you into a voluntary disclosure without engaging in the unauthorized practice of law (a crime in itself). Only an Attorney trained in Criminal Tax Defense fully understands the risks and rewards involved in voluntary disclosures and how to protect you if you do not qualify for a voluntary disclosure.

As uniquely qualified and extensively experienced Criminal Tax Defense Tax Attorneys, Kovel CPAs and EAs, our firm provides a one stop shop to efficiently achieve the optimal and predictable results that simultaneously protect your liberty and your net worth.   See our Testimonials to see what our clients have to say about us!

If You Need Help with Your Tax Issues, Call Our Law Firm for Assistance

Seek guidance and support from our experienced Dual-Licensed Tax Lawyers & CPAs at the Tax Law Offices of David W. Klasing by calling (800) 681-1295 or clicking here to schedule a reduced rate initial consultation today.

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Public Contact: Dave Klasing Esq. M.S.-Tax CPA, dave@taxesqcpa.net

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