Businesses and High-Income Individuals in New Jersey Could Face High-Risk IRS Audits in 2025

The Internal Revenue Service (IRS) is following through on plans it announced last year to aggressively audit large businesses and high-income individuals. For corporate and individual taxpayers that fall within the IRS’ current audit priorities, avoiding unnecessary liability requires a proactive approach before the audit process begins. Learn more from New Jersey tax audit lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group:

IRS Announces Plans to Prioritize Business and High-Income Taxpayer Compliance in 2025 and 2026

In May 2024, the IRS updated its Strategic Operating Plan with a specific focus on business and high-income taxpayer compliance. While the IRS stated that audits of small businesses and individuals who earn less than $400,000 will “remain at historically low levels,” it simultaneously announced plans to substantially increase the number of audits it conducts targeting large businesses and high-income individuals. By the end of the 2026 tax year, the IRS plans to:

• Increase audits of large corporations with assets over $250 million from 8.8 percent to 22.6 percent;
• Increase audits of complex partnerships with assets over $10 million from 0.1 percent to 1.0 percent; and,
• Increase audits of individuals with over $10 million in positive income from 11 percent to 16.5 percent.

For taxpayers in New Jersey who fall into these categories, preparing for the possibility of an IRS audit in 2025 or 2026 needs to be a priority. Broadly speaking, this means that they should take steps, including (but not limited to):

• Identify Potential Compliance Concerns – Large corporate taxpayers and high-income individual taxpayers that are at risk of facing an IRS audit should work with their tax counsel to identify any compliance concerns that are likely to trigger enhanced scrutiny during the audit process.
• Prepare Substantiating Documentation – Regardless of any concerns about noncompliance, these taxpayers should also work with their tax counsel to ensure that they have the documentation they need to substantiate the contents of their federal returns that are subject to auditing.
• Target a Proactive Resolution If Necessary – If an IRS audit is likely to lead to the imposition of liability for back taxes, interest and penalties, taking a proactive approach and pursuing a pre-audit resolution could significantly mitigate the consequences of past noncompliance.

Again, these are just examples. IRS audits targeting large businesses and high-income individuals can present substantial risks—so a comprehensive, strategic and forward-thinking approach is critical. If you need to know more about what you can (and should) do to protect yourself or your business in the event of an IRS audit, contact us today.

Request a Call with New Jersey Tax Audit Lawyer Kevin E. Thorn

Kevin E. Thorn, Managing Partner of Thorn Law Group, is a highly experienced New Jersey tax audit lawyer who has helped numerous clients successfully navigate complex and high-stakes federal tax audits. To request a call with Mr. Thorn, give us a call at 201-842-7696 or tell us how we can get in touch online.