How to Prepare for the Ensuing IRS Enforcement Staffing Increase

General Business

June 30, 2016
by Kevin Janke, CPA, ABV, ASA, Francis Egan, CFA

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Kevin Janke Kevin Janke, CPA, ABV, ASA

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Francis Egan Francis Egan, CFA
Manager, Valuation, Litigation and Transaction Services

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According to a memo from IRS Commissioner John Koskinen, the IRS will hire 600 to 700 new employees to focus on tax enforcement in the near future. This represents the IRS’s first large-scale hiring in recent memory. The IRS views this as a prudent investment, as Mr. Koskinen noted that each employee returns “almost $10” to the U.S. Treasury for every dollar spent. Assuming 700 employees are hired at a cost of $50,000 per employee, the move would yield a potential profit of over $300 million dollars.

With increased staffing levels comes increased scrutiny of gift and estate tax returns. It is likely that additional employees will allow more of these returns to be reviewed, resulting in more audits and challenges. It’s interesting to note that formal business valuations are not always specifically required for gifting or estate tax return preparation; they are often required to meet the IRS’s adequate disclosure regulations. In addition, a quality valuation can proactively reduce the likelihood of future disputes.


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