My own anecdotal experience and online comments from other tax professionals indicates that tax audits and collection activity have increased this year at all levels – federal, state and local. This observation of rapidly increasing tax collection activities is not reflected in published data.
Discrepancy between published data vs observed data:
Four months ago the GAO published a report (https://www.gao.gov/products/gao-22-104960 ) based on historical audit trends that left Americans with the impression that their risk of a tax audit is minimal. That is not what I observe lately. More taxpayers are now in the early stages of tax collection activity this year than any other in memory. It seems like we are suffering a lag in reporting from that historical data to what is actually happening today. The gap between public beliefs vs. the current level of collection activity is having a secondary impact in taxpayer behavior that may adversely affect the quality of taxpayer decisions. (I have recent anecdotal stories of that effect, but this side issue is not addressed here).
Near term expectations:
Expectation of increased IRS collection activities: IRS estimated that individual taxpayers underreported their income tax on average by $245 billion each year for tax years 2011 to 2013. This underreporting is the largest component of the tax gap—the difference between the amount of taxes owed and taxes paid timely and voluntarily.
Expectation of increased state tax collection activities: We expect to see increased audits because of expanding tax bases under evolving law and increasing use of tax collection technology . States are aggressively seeking additional sources of revenue after the pandemic.
It would be useful for us the tax representation profession to develop alternate short term benchmarks as indicators of current tax collection activity, even if those indicators are only informal and not focused on accuracy.