UPDATE 1-Biden budget would beef up IRS tax enforcement -Yellen

(Adds details on community institutions, illicit financing)

By David Lawder

WASHINGTON, April 9 (Reuters) - U.S. Treasury Secretary Janet Yellen said on Friday that the Internal Revenue Service budget would increase by $1.2 billion or 10.4% under President Joe Biden's fiscal 2022 budget request.

Yellen, in a statement, said the $13.2 billion overall IRS budget would include an additional $900 million for tax enforcement in fiscal 2022. The Treasury is seeking to increase revenues by shrinking the "tax gap," the difference between taxes legally owed and those collected.

IRS officials have said that more than a decade of reduced or stagnant budgets have left the agency with 15,000 fewer revenue agents than it had in 2010, forcing it to reduce the number of audits it conducts and leaving significant tax fraud undetected.

Yellen said the budget request will increase fairness in the tax system.

"It will make paying taxes a more seamless process for millions of Americans. And it makes sure that corporations actually pay what they owe," she said in a statement.

The proposed Biden budget for fiscal 2022, which starts on Oct. 1, includes a request for $330 million to support Community Development Financial Institutions, which serve low-income and minority areas, an increase of 22.2% over the fiscal 2021 normal appropriation.

The amount would build on a $12 billion injection into CDFIs and minority-owned banks that was approved as a part of the 2020 year-end coronavirus rescue legislation.

The Treasury also is requesting a $64 million increase for the Financial Crimes Enforcement Network, which combats money laundering and polices financial reporting, bringing the fiscal 2022 total for the agency to $191 million. (Reporting by David Lawder; Editing by Andrea Ricci)