The Internal Revenue Service (IRS) intended to increase its efforts to collect delinquent taxes from wealthy taxpayers.
The Inflation Reduction Act provides billions in additional funding for this initiative, targeting affluent tax evaders.
IRS Bolsters Pursuit of Wealthy Tax Evaders with Inflation Reduction Act Funding
According to an official statement from the agency, the IRS will initially target 1,600 individuals who owe at least $250,000 in back taxes. During fiscal year 2024, beginning in October 2024 and concluding in September 2024, the IRS plans to deploy “dozens of revenue officers” to focus on high-end collections cases.
The Inflation Reduction Act of 2022 allocated $80 billion to the Internal Revenue Service, with more than half designated for hiring additional enforcement agents.
The overarching objective is to increase national tax revenue by focusing on wealthy taxpayers who conceal or underreport their income.
As their earnings are routinely reported to the IRS through W2s and other tax documentation, these strategies are less prevalent among lower-income individuals.
IRS Commissioner Danny Werfel emphasized the anger of law-abiding taxpayers who observe affluent filers evading tax obligations.
During a pre-announcement press conference, Werfel stated, “If you pay your taxes on time, it should be especially frustrating to see wealthy filers not doing so.”
In addition to pursuing individual millionaires, the Internal Revenue Service will intensify its surveillance of 75 prominent business partnerships with average assets of $10 billion or more. The agency plans to utilize artificial intelligence technology to pursue tax evaders.
Despite these efforts, the IRS reaffirmed that audit rates for individuals earning less than $400,000 per year will remain the same.
Right-leaning policy experts and some Republican legislators expressed concern that workers with middle-class incomes might receive an unfair share of the recently discovered IRS funding.
Audit rates have declined significantly in recent decades, predominantly due to the IRS’s dwindling workforce.
Even though the US population and the number of taxpayers continued to increase, the agency employed 82,000 employees in fiscal year 2021, down from 94,000 in 2010.
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Dramatic Decline: Million-Dollar Tax Return Audits Plummet Despite Soaring High-Income Filers
Surprisingly, the number of audits conducted on million-dollar tax returns has dropped by two-thirds over the past decade despite a 50% increase in individuals with incomes of $1 million or more.
IRS Commissioner Werfel remarked, “The years of underfunding preceding the Inflation Reduction Act resulted in the lowest audit rate for wealthy filers in our history.”
The top 1% of US income earners must report more than 20% of their income, according to a study by academic economists and IRS researchers conducted in 2021. This finding emphasizes the significance and urgency of the IRS’s renewed efforts to combat tax evasion among the wealthy.
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