IRS expands hiring efforts, focuses on partnership audits

The IRS is planning to hire an additional 10,000 employees over the coming weeks and months. These new personnel will concentrate on an ever-increasing focus on partnership audits as well as assisting with return backlog and technology modernization. Open positions, which the IRS will begin posting later this month, will range from entry-level clerical jobs to tax specialists and attorneys to engineers.

Staffing has been a major obstacle for the IRS over the last decade. The agency has lost approximately 20,000 employees since 2010, dwindling their workforce to the current level of 74,000. If the IRS is successful in hiring 10,000 new employees, it will represent an increase of 14%.

In an effort to expedite the hiring process, the IRS requested and was granted direct hiring authority from the Office of Personnel Management. This permission will allow the agency to bypass some of the more onerous procedures typically required for federal positions. In addition, there are reports of exemptions to federal salary caps that will help the IRS recruit experts who are currently working in the private sector.

While the omnibus legislation currently making its way through Congress does increase the IRS’ annual budget, it is unclear how much of the proposed $12.6 billion is stipulated for employee hiring and retention.

Focus on partnership audits

The IRS is ramping up scrutiny of pass-through entities, with a particular focus on partnership taxation.

According to a recent Bloomberg article, Lauren Troderman, team manager for pass-through entities at the IRS, said the agency is trying to increase its number of partnership audits since its need to look at partnerships has intensified in response to the rising number of partnership filings.  

Audits of large partnerships are expected to escalate as the IRS implements the Large Partnership Compliance (LPC) Pilot Program. The LPC program, which began in late 2021, targets partnerships with over $10 million in assets. Under the new system, data analytics of certain criteria are used to identify partnerships with the highest risk of noncompliance. Entities selected for audit will not center on a single issue; instead, the entire return will be subject to examination.

The LPC audit process will focus on not only the current examination, but also the collection of data. The IRS will use LPC audit findings to refine algorithms, further improve methods of identifying issues and assess the compliance risk of partnership tax filings.