As the Internal Revenue Service (IRS) continues to adapt to evolving financial and tax landscapes, its enforcement priorities remain a critical focus for taxpayers. Understanding these priorities can help individuals and businesses stay compliant and avoid costly penalties or audits.
In this blog, we’ll explore seven key IRS enforcement priorities for 2025 and what they mean for taxpayers.
1. Crackdown on High-Income Tax Evasion
The IRS is intensifying efforts to identify high-income individuals and businesses that underreport income or fail to file returns. Recent initiatives include:
- Expanded audits targeting high-net-worth individuals.
- Focus on foreign income reporting through the Foreign Account Tax Compliance Act (FATCA).
- Increased scrutiny on offshore accounts and undisclosed income.
How to Stay Compliant:
Ensure all sources of income are accurately reported, including investments, foreign accounts, and business earnings.
2. Digital Currency Compliance
With the rise of cryptocurrency transactions, the IRS is ramping up enforcement in this area. Key priorities include:
- Ensuring taxpayers report cryptocurrency gains and losses.
- Tracking transactions using third-party reporting requirements for crypto exchanges.
- Pursuing individuals and entities that fail to comply with virtual currency tax regulations.
How to Stay Compliant:
Maintain detailed records of all cryptocurrency transactions and consult with a tax professional to ensure proper reporting.
3. Employment Tax Enforcement
Businesses that fail to withhold or pay employment taxes remain a top target. The IRS is increasing its focus on:
- Misclassification of employees as independent contractors.
- Unpaid payroll taxes.
- Noncompliance with Social Security, Medicare, and unemployment tax contributions.
How to Stay Compliant:
Conduct regular reviews of payroll processes and ensure proper classification of workers.
4. Focus on Partnerships and Pass-Through Entities
Partnerships and pass-through entities, such as LLCs and S-Corporations, are under heightened scrutiny due to their complex tax structures. The IRS aims to identify:
- Abusive tax shelters.
- Underreported income.
- Improper use of deductions or credits.
How to Stay Compliant:
Work with a tax professional to navigate partnership tax rules and ensure accurate reporting.
5. Enhanced Audit Capabilities
The IRS is leveraging technology and data analytics to identify potential audit targets more efficiently. This includes:
- Automated tools to flag discrepancies in tax filings.
- Cross-referencing data from multiple sources to detect inconsistencies.
- Increased audits for industries with historically low compliance rates.
How to Stay Compliant:
Double-check tax filings for accuracy and maintain comprehensive records to substantiate claims.
6. Combatting Tax Fraud and Identity Theft
Tax fraud and identity theft remain significant concerns for the IRS. Key initiatives include:
- Enhanced security measures to detect and prevent fraudulent tax filings.
- Prosecution of individuals involved in tax-related identity theft schemes.
- Increased public awareness campaigns on phishing and other scams.
How to Stay Compliant:
Monitor your financial information closely, use secure platforms for tax filing, and report suspicious activity immediately.
7. Strengthening Corporate Tax Compliance
Large corporations are facing increased scrutiny as the IRS seeks to close the tax gap. Priorities include:
- Ensuring accurate reporting of global income.
- Investigating transfer pricing practices.
- Monitoring compliance with new tax laws and regulations.
How to Stay Compliant:
Conduct regular compliance audits and stay informed about updates to corporate tax laws.
How Carver Law Office, PLLC Can Help
At Carver Law Office, PLLC, we understand how overwhelming IRS enforcement actions can be. Our experienced tax attorneys are here to help you navigate these challenges, protect your rights, and ensure compliance. Whether you’re an individual taxpayer or a business owner, we offer:
- Audit defense and representation.
- Assistance with cryptocurrency tax compliance.
- Guidance on employment and corporate tax regulations.
Don’t let IRS enforcement priorities catch you off guard. Contact Carver Law Office, PLLC today for expert tax support and peace of mind.
Understanding these enforcement priorities can help you prepare for 2025 and beyond. By staying informed and proactive, you can avoid costly mistakes and ensure compliance with tax regulations.