Yellen tells IRS not to increase middle-class audits if it gets more funding

WASHINGTON (Reuters) -U.S. Treasury Secretary Janet Yellen told the Internal Revenue Service on Wednesday that if the Inflation Reduction Act became law additional IRS resources should not be used to increase audit rates on taxpayers making under $400,000 a year.

The legislation, which passed the Senate over the weekend with no Republican support, increases the IRS budget by about $80 billion over 10 years.

Democrats say beefing up IRS enforcement will increase tax collection and help pay for the $430 billion bill, which tackles climate change and lowers prescription drug costs for seniors, among other provisions.

Republicans have criticized the additional funding for IRS tax enforcement, saying the agency will not just focus on wealthier taxpayers but also go after middle-class families.

Yellen told IRS Commissioner Charles Rettig in a letter released by the Treasury Department that any new IRS personnel “shall not be used to increase the share of small business or households below the $400,000 threshold that are audited relative to historical levels.”

The IRS is a bureau of the Treasury Department.

Yellen said, “contrary to the misinformation from opponents of this legislation, small business or households earning $400,000 per year or less will not see an increase in the chances that they are audited.”

The House of Representatives is expected to vote on the bill on Friday. President Joe Biden has said he would sign it into law.

(Reporting by Eric Beech; Editing by Bradley Perrett)