Don't Mess With Taxes

Photo by Lance Reis on Unsplash

In March, the Internal Revenue Service and Treasury Department announced they were going after non-filing millionaires.

Today, they reported that the IRS has collected more than $1 billion from high-wealth taxpayers with past-due taxes.

With resources bolstered by added Inflation Reduction Act funds, the IRS said it stepped up compliance activity specifically on 1,600 individuals whose incomes were more than $1 million per year and who each owed the IRS more than $250,000 in recognized tax debt.

The IRS assigned 1,500 to revenue officers to the cases. They got payments from more than 1,200 wealthy individuals, totaling $1 billion in collections.

And the tax collection effort is looking to go beyond this milestone mark.

“Funding from the Inflation Reduction Act is reversing a decade-long decline in our compliance work, including increasing our compliance work involving the wealthiest individuals and groups with tax issues,” said IRS Commissioner Danny Werfel. “Our increased work in this area means these past-due tax bills from high-end taxpayers are no longer being left on the table, like they were too often in the past.”

Werfel added that the collection results achieved in less than a year reveal the magnitude of what can be achieved as enforcement continues to ramp up in the months ahead.

Other areas of attention: The non-filing taxpayer cases were prompted by third party information sent to the IRS, such as W-2 and 1099 forms, indicating the high-income individuals had received income.

However, the IRS did not get the individuals’ corresponding 1040s. And until the agency got the additional Inflation Act funding, it did not have to personnel to pursue the cases.

The added money also is allowing the IRS to expand its focus on ensuring compliance by high-income taxpayers in other areas.

In the past two years, the IRS has launched —

• A new initiative to crack down on abuse of corporate jets for personal travel.
• Audits of 76 of the largest partnerships with average assets of $10 billion that represent a cross section of industries including hedge funds, real estate investment partnerships, publicly traded partnerships, and large law firms.
• Audits of the 60 largest corporate taxpayers, with average assets of $24 billion.  
• And a new regulatory initiative to close a major tax loophole exploited by large, complex partnerships that could raise more than $50 billion in revenue over 10 years. 

These compliance efforts, aided by the Inflation Reduction Act money, “is increasing tax fairness and ensuring that all wealthy taxpayers pay the taxes they owe, just like working families do,” said U.S. Secretary of the Treasury Janet L. Yellen.

Cutting the Tax Gap: The increased collections also will narrow the gap between taxes owed and taxes paid, popularly known as the Tax Gap. That will help reduce the deficit.

A recent Treasury and IRS analysis shows the investments in high-end enforcement, technology, and data, if continued as proposed, will produce an additional $851 billion in tax revenue over the next decade.

You also might find these items of interest:

• Tax the rich efforts increasing, in U.S. and elsewhere
• AI will be part of expansive IRS crackdown on wealthy, corporate tax evaders
• A global wealth tax on billionaires would bring in $250B a year, says EU tax group

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