President Biden’s IRS audit pledge is becoming increasingly worthless. Biden and Treasury Secretary Janet Yellen had promised not to increase IRS audits on households and small businesses making less than $400,000 per year.
But Biden is constantly finding ways to make the pledge meaningless. The most recent: He has decided to use a creative definition for “income” so that the IRS can subject a greater number of households and small businesses to audits.
Instead of using Adjusted Gross Income as the definition for income, the Biden IRS declared it will use something called “Total Positive Income” in order to sweep up more taxpayers into the IRS audit maw.
As noted in a Treasury Inspector General for Tax Administration (TIGTA) report published March 11:
“The measurement of income will be based on the Total Positive Income rather than the Adjusted Gross Income. According to the IRS, Total Positive Income is a better measurement because it reflects a taxpayer’s income rather than Adjusted Gross Income which reflects multiple adjustments that may offset the income.”
When elected officials and tax practitioners use the word “income” it is commonly understood to mean AGI — adjusted gross income. Biden went out of his way to use an alternative definition so as to maximize the number of individuals and small businesses he can audit.
As the report notes, households and small businesses incurring a loss in a given year are every bit as eligible for an IRS audit even if their respective AGI ends up well below $400,000:
“Total Positive Income is the source of all positive amounts shown for the various sources of income reported on the individual tax return, and therefore, excludes losses.”
This is just the latest incident of Biden watering down his pledge. Biden’s IRS also refuses to alter its internal definition of “high income household” which has been in place since 1976. The IRS considers households and small businesses making more than $200,000 to be classified on IRS systems as “high income.”
The official IRS watchdog — TIGTA — urged the Biden administration to scrap the $200,000 definition because it will make it impossible to comply with the Biden audit pledge.
But Biden refused, asserting that it needs “agility” to target whomever it wishes.
TIGTA warned in August 2023:
“There is no way to identify the complete population of taxpayers that meet the criterion of $400,000 or more specified by the current Treasury Secretary.”
TIGTA in August 2023 also noted:
“The IRS does not have a unified or updated definition for individual high-income taxpayers. The Tax Reform Act of 1976 required annual publication of data on individual income tax returns reporting income of $200,000 or more. The current examination activity code schema still uses $200,000 as the main threshold.”
A household making $200,000 in 1976 was truly high income. Adjusted for inflation, it is equal to $1.1 million in today’s dollars. But Biden’s IRS won’t scrap the 1976 figure.
Biden’s inflation has also significantly eroded his $400k tax increase pledge. It is now worth only $337k in Jan. 2021 (the month he took office) dollars, according to the federal government’s BLS inflation calculator.
Biden would need to raise the threshold to $474,537 in order to be consistent, again per the federal government’s BLS inflation calculator.
“Biden’s $400,000 audit promise is not credible, as taxpayers suspected all along,” said Grover Norquist, president of Americans for Tax Reform.