The Internal Revenue Service (IRS) announced in a press release on Thursday that its strategy to target rich tax evaders is working, as it has collected over $1 billion in past-due taxes from millionaires who owe the country money since 2023.
In the same year, the IRS launched a campaign to track down wealthy and high-earning people who had neglected to settle their acknowledged tax obligations.
During this specific stage of the campaign, around 1,600 high-income people were the target population. Accordingly, those people’s average tax liability is $625,000, far more than the average return of around $54,000 in adjustments for each audit. It appears that the wealthiest and highest earning individuals receive the biggest return on their audit investment.
IRS Campaign Targets
The program was aimed at taxpayers who reported earnings of at least $1 million and tax obligations exceeding $250,000. The IRS deployed hundreds of senior officials to the cases and increased efforts to assure compliance among the rich.
The IRS has also stepped up its crackdown on the misuse of corporate jets for personal travel, high-income owners who haven’t filed taxes, auditing 76 sizable partnerships and 60 corporate taxpayers, and formulating policies to tighten loopholes used by complex partnership structures.
The IRS projects a sizable revenue return if the investments made under the Inflation Reduction Act (IRA) continue, possibly reaching $851 billion over the course of the next 10 years.
The purpose of the joint release with the US Treasury Department is to demonstrate how the $80 billion in funding for the IRS provided by the 2022 Inflation Reduction Act is contributing to the recovery of revenue for the US government.
The cash would be utilized, as some Republican senators had wrongly alleged, to recruit 87,000 additional IRS officers “to audit Walmart shoppers.” However, the IRS has stated that the additional funds are being utilized to upgrade technology, hire more customer service agents to handle more calls, and resume operations after the pandemic shuttered its offices and resulted in years of backlogs and processing delays.
Additionally, the government is increasing the number of audits it conducts on individuals who earn more than $1 million a year and owe more than $250,000 in taxes. Federal officials have stated that their primary targets are major firms and the rich, but they have promised not to raise the audit rate for individuals making less than $400,000.
U.S. Secretary of the Treasury Janet Yellen stated in a statement, “President Biden’s Inflation Reduction Act is increasing tax fairness and ensuring that all wealthy taxpayers pay the taxes they owe, just like working families do.” “A new initiative to collect overdue taxes from a small group of wealthy taxpayers is already a major success, yielding more than $1 billion in revenue so far.”
Commissioner Danny Werfel of the IRS unveiled the agency’s plans to step up enforcement in May. Among other things, he said that the audit rate of businesses with assets over $250 million would be tripled, and the audit rate of individuals with positive income over $10 million would be doubled.
Republicans have successfully threatened and occasionally implemented a number of cuts to the IRS. As part of the debt ceiling and budget cutbacks deal that Congress enacted in the summer of 2023, House Republicans included a $1.4 billion cut to the IRS. A second agreement was part of the package, committing $20 billion to be taken from the IRS over the following two years and used for non-defense projects.
