The Tax Times: IRS Sharply Increases High-Income Audits in Fiscal Year 2024

Wednesday, July 30, 2025

IRS Sharply Increases High-Income Audits in Fiscal Year 2024

The IRS made a notable shift in audit strategy during Fiscal Year 2024, boosting examinations of high-income individuals in line with federal mandates—but according to a new report from the Treasury Inspector General for Tax Administration (TIGTA), important questions remain about how compliance is defined and tracked.

A Dramatic Increase in High-Income Audits

In 2024, the IRS set a course to increase oversight of those with Total Positive Income (TPI) over $400,000. This strategic move resulted in 17% of all individual audits targeting this group, a sizable jump from the mere 6% average in the previous five years. The planned number of high-income audits hit almost 71,000 returns—about 2.5 times more than the annual average between 2019 and 2023.

Both major IRS divisions saw significant shifts in their focus:

· The Small Business/Self-Employed (SB/SE) Division nearly quadrupled its share of high-income audits, going from 12% to 42% of its total workload.

· The Large Business and International (LB&I) Division increased its high-income audit proportion from 44% to 62%.

This rebalancing of resources means thousands more high-income returns under scrutiny, with corresponding drops in audit rates for those making $400,000 or less.

Responding to the 2022 Treasury Directive

This shift followed a 2022 Treasury Directive, issued after the Inflation Reduction Act, which directed the IRS not to raise audit rates for lower- and middle-income households or small businesses. TIGTA found that the IRS indeed reduced audits for taxpayers under $400,000 and for Earned Income Tax Credit recipients, confirming compliance with the spirit of the directive.

To carry out this strategy, the IRS brought in more revenue agents. Yet, the report noted that subsequent budget cuts and staffing reductions in 2025 now threaten to undermine these gains—a potential challenge for future compliance efforts.

Key Issues Remain Unresolved

Despite these alignment efforts, TIGTA’s audit spotlighted unresolved core questions: What exactly defines a “high-income” taxpayer across all IRS programs? How should compliance with the Treasury Directive be measured and reported? TIGTA found that the IRS had not formalized these definitions or established clear, uniform methods for tracking audit rates and compliance.

This creates gray areas in oversight—making it difficult for leadership, Congress, and the public to judge whether the IRS is truly meeting its mandate. TIGTA emphasized the need for more precise definitions and transparent procedures to ensure reliable compliance and public trust.

Looking Ahead

The report praised the IRS for realigning resources as Congress and the Treasury intended. Still, sustaining these changes is at risk unless the agency addresses the fundamental gaps in definitions, measurement, and workforce needs.

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