IRS plans to crack down : The IRS has revealed its intention to launch a vigorous campaign targeting 1,600 millionaires and 75 large business partnerships that owe hundreds of millions of dollars in overdue taxes.
IRS Commissioner Daniel Werfel announced that with increased federal funding and the assistance of artificial intelligence tools, the agency is equipped with new methods to identify wealthy individuals who have evaded their tax obligations.
Werfel expressed the frustration of law-abiding taxpayers when they witness wealthy individuals failing to meet their tax responsibilities. The focus of the campaign is on 1,600 millionaires, each of whom owes at least $250,000 in back taxes, and 75 large business partnerships with an average of $10 billion in assets.
A significant hiring initiative and the utilization of AI research tools, developed by IRS personnel and contractors, are pivotal in identifying affluent tax evaders. The agency aims to showcase positive outcomes resulting from the increased funding it has received during President Joe Biden’s Democratic administration, even as Republicans in Congress seek to reduce such funding.
Werfel highlighted that these new tools enable the IRS to detect patterns and trends that were previously invisible, enhancing confidence in locating large partnerships that have shielded income.
In July, the IRS reported collecting $38 million in delinquent taxes from over 175 high-income taxpayers within a few months. Now, the agency plans to expand these efforts, with dozens of revenue officers dedicated to high-end collection cases in fiscal year 2024.
A study conducted by academic economists and IRS researchers in 2021 revealed that the top 1% of U.S. income earners fail to report more than 20% of their earnings to the IRS.
The newly announced tax collection initiative is set to commence in October, with Werfel acknowledging the need for further hiring. He anticipates a busy fall season for the IRS.
Grover Norquist, who leads the conservative Americans for Tax Reform, expressed concerns that the IRS’s pursuit of high-wealth individuals might eventually lead to audits of middle-income Americans for political reasons.
The IRS’s enhanced capability to identify tax delinquents was made possible through the Inflation Reduction Act, signed into law by President Biden in August 2022. However, the agency’s funding remains subject to potential reductions by Congress, as exemplified by House Republicans’ reduction of IRS funding and redirection of funds to non-defense programs. With potential budget disputes on the horizon, further cuts to the agency are possible.
David Williams emphasizes a straightforward principle: every business and individual should fulfill their tax obligations, with no exceptions.
Senate Finance Committee Chair Ron Wyden, a Democrat from Oregon, has expressed strong support for the IRS’s new plan, characterizing it as a significant development. He believes it represents a fresh approach to combatting sophisticated tax evasion and aligns with the Democrats’ broader goal of ensuring that the wealthiest individuals pay their fair share of taxes.
David Williams, affiliated with the right-leaning nonprofit organization Taxpayers Protection Alliance, underscores the principle that every business and individual should meet their tax obligations without exceptions. However, he expresses concern that this initiative might be used as a pretext to hire a large number of new IRS agents, potentially leading to extensive audits of the American population.
The IRS’s increased ability to identify tax delinquents was made possible by resources provided through the Inflation Reduction Act, signed into law by President Biden in August 2022. Although the law allocated $80 billion to the agency, this funding is susceptible to potential reductions by Congress.
House Republicans incorporated a $1.4 billion reduction in IRS funding into the debt ceiling and budget cuts package passed by Congress during the summer. Furthermore, the White House stated that the debt deal includes a separate agreement to divert $20 billion from the IRS over the next two years to other non-defense programs.
Given the ongoing dispute over spending levels and the looming threat of a government shutdown, there is a possibility of additional cuts to the agency’s budget.