In the U.S. the ‘Inflation Reduction Act’, which will not reduce inflation, contains a provision for increasing the IRS budget by over $80 billion and doubling its number of agents. The politics of this says that it will have no effect on people with incomes below $400K per year. That, of course, is not true. They claim that they will get $200 billion return on the $80 billion expenditure. In order to do that, they really only have one option. They need to go after people whose audits are likely to generate additional tax, penalty and interest.
The most important target are going to be workers in the ‘Gig’ economy. An example would be a person who gets $500 for setting up a web page. The purchaser doesn’t issue a 1099 and the designer doesn’t declare the income. It is estimated that 36% of all workers are in the ‘Gig’ economy. Some, like contract workers probably get 1099s and the agencies report the income. However, much of it is underground. The audit process is different because there isn’t a Schedule C or business deductions or anything like that. The auditor attempts to demonstrate that the person’s standard of living couldn’t be financed with the declared income. So, they will look at bank records, look for expenditures that were not paid through the bank account, look at Paypal, Stripe, etc. payments.
They will also look at expats to determine if they are earning income in their resident countries that is not being declared. They will be looking for FATCA violations, etc.
I am very skeptical that they will be able to run to ground and receive $200 billion of additional revenue. In other words, the expenses are hard, but the income is soft.