Yellen Tells IRS Not to Target Middle-Income Americans With Audits as Crackdown Fears Swirl

Treasury Secretary Janet Yellen has ordered the Internal Revenue Service (IRS) not to send tax enforcers to audit households making less than $400,000 per year after concerns were raised that a massive funding boost to the agency would be used to crack down not on wealthy tax dodgers but to bully middle-income Americans.

The Inflation Reduction Act, which recently cleared the Senate in a partisan vote and is expected to be approved by the House as soon as Friday, allocates some $80 billion in additional funding for the IRS, with a portion earmarked for increased enforcement such as audits.

Yellen said in an Aug. 10 letter to IRS Commissioner Charles Rettig that the “much-needed” funding would be used to modernize outdated technological infrastructure, improve taxpayer service, and enforce tax laws against high-earners and big corporations that don’t pay what they owe in taxes.

She vowed that audit rates wouldn’t increase for households making less than $400,000 per year.

“Specifically, I direct that any additional resources—including any new personnel or auditors that are hired—shall not be used to increase the share of small business or households below the $400,000 threshold that are audited relative to historical levels,” Yellen said.

“This means that, contrary to the misinformation from opponents of this legislation, small business or households earning $400,000 per year or less will not see an increase in the chances that they are audited,” she added.

Charles P. Rettig, commissioner of the Internal Revenue Service, testifies during a Senate Finance Committee hearing on the IRS budget request on Capitol Hill in Washington, on June 8, 2021. (Tom Williams/POOL/AFP via Getty Images) Audits Targeting Middle-Income Americans?

Republicans have speculated that the money would be used to hire tens of thousands of IRS agents while arguing that their enforcement efforts would target ordinary Americans.