TIGTA Reports High-Income Examinations Rose in Fiscal Year 2024, But the Future of Increased Examinations is Uncertain

The Treasury Inspector General for Tax Administration (TIGTA)’s July 10, 2025, report on individual examinations reveals that the IRS significantly increased examinations of high-income individuals in Fiscal Year 2024. As expected, taxpayers earning more than $400,000 were the most affected by the IRS’s shift in examination policy. The IRS’s recent activity has major implications, especially for taxpayers earning more than $400,000 per year. Audit risk is rising, and high-income individuals with complex tax filings face increased risk compared to those in recent years.  

How Did the IRS Get Here? 

The Inflation Reduction Act (IRA) of 2022 provided $79.4 billion to the IRS over a decade, including $45.6 billion for enforcement activities. Soon after the IRA was passed, the Secretary of the Treasury issued a memorandum (the 2022 Treasury Directive) to the IRS Commissioner that directed the IRS not to use any additional resources to increase audits on small businesses or households earning below $400,000 per year. 

The IRS later released the Inflation Reduction Act Strategic Operating Plan (the IRA Plan) to outline IRA funding priorities. In the IRA Plan, the IRS outlined objectives to address high-dollar compliance areas, such as complex partnership structures, large corporations, and high-income individuals. The IRA Plan notably featured employee hiring and training that focused specifically on expanded enforcement of complex tax filings and high-dollar noncompliance. In Fiscal Year 2024, the IRS went on to hire 4,048 new revenue officers and revenue agents. 

TIGTA initiated the July 10, 2025, report to review the IRS’s examination plan to make sure that IRA funding was used in line with the 2022 Treasury Directive. 

Who’s Being Audited? 

TIGTA’s report identified that the IRS’s 2024 examination plan led to an increase in examinations for individuals with incomes over $400,000 when compared to the average in 2019 through 2023. Examinations of high-income returns made up 17% of total audit starts in 2024, representing almost 2.5 times the average number of high-income examinations started in 2019 through 2023. 

Meanwhile, examination rates on taxpayers earning under $400,000 did not increase, indicating that the IRS was on track to meet the 2022 Treasury Directive to not increase examination rates on taxpayers with incomes at or under $400,000.  

Outstanding Issues 

TIGTA noted in the report that there are several issues the IRS needs to address to comply with the 2022 Treasury Directive. Mainly, TIGTA suggests that the IRS needs to complete its methodology for defining high-income returns.  

For instance, the 2022 Treasury Directive covers small businesses as well as households with income less than $400,000. However, the IRS has yet to define the term “small business” for purposes of the Directive. The IRS currently considers a small business as one having less than $10 million in assets for examination purposes. It remains unclear whether the same definition applies to the 2022 Treasury Directive. So, some businesses may qualify as small for IRS examination purposes, but they might not meet the criteria to be covered by the 2022 Treasury Directive.  

TIGTA also points out that the IRS has not considered a potential penalty for married taxpayers filing jointly under the Directive. The Directive makes no distinction between married households filing jointly or separately, resulting in potential situations where dual-income couples filing separately are less likely to be audited than married couples filing jointly if neither spouse individually earns over $400,000 per year.  

What to Expect in 2025 and Beyond 

With sweeping changes occurring in the IRS, it’s difficult to predict what’s next for taxpayers moving forward. In recent months, the IRS has undergone numerous changes in leadership, had significant funding rescinded, implemented a hiring freeze, and undergone reorganization plans to shrink the size of its workforce. These measures included permitting eligible employees to resign under the Deferred Resignation Program and commencing early retirement initiatives for federal employees. According to another recent TIGTA report, more than 25,000 IRS employees have departed from the agency in 2025, with more expected to come. The report notes that 26% of employees responsible for conducting audits have separated as of May 2025.  

Moving forward, taxpayers can expect an increased emphasis on automated support and reliance on artificial intelligence from the IRS. Treasury Secretary Scott Bessent has shared that the IRS plans to enhance collections through smarter IT and AI.  

In these times of uncertainty, it is essential that taxpayers, especially those earning over $400,000, stay informed and prepared. Taxpayers should consider reviewing their documentation so that their tax filings are well-supported, consulting tax controversy experts familiar with IRS audit procedures, and conducting internal reviews or audits to identify potential risks.  

While taxpayers earning more than $400,000 remain at risk, sweeping changes in the federal government could impact how audits are conducted in 2025 and beyond. Proactive planning and expert guidance will be key to navigating this shifting landscape. Contact our team below if you have questions.