The IRS has collected $160 million this year through audits of millionaires who failed to pay their owed taxes

The IRS has collected $160 million this year through audits of millionaires who failed to pay their owed taxes

  • 23.10.2023 11:43

The IRS has collected $160 million this year through audits of millionaires who failed to pay their owed taxes. This effort to crack down on wealthy individuals has been boosted by increased federal funding provided by Democrats last year under the Inflation Reduction Act. Republicans have criticized the IRS's funding levels, and the future of funding remains uncertain.

In September, the IRS started demanding repayment from approximately 1,600 taxpayers with incomes exceeding $1 million and debts over $250,000. So far, the agency has closed 100 of these cases, collecting $122 million.

Earlier this year, the IRS collected $38 million from more than 175 taxpayers. This brings the total amount collected this year to $160 million.

According to IRS Commissioner Danny Werfel, "The data we have seen to date, in terms of the amount we have collected, suggests that this is very important work for us."

In one successful case last month, an individual was ordered to pay over $15 million in restitution for falsifying personal expenses.

Another taxpayer recently pleaded guilty to filing false income tax returns and embezzling over $670,000 from their business. According to the IRS, this individual spent $110,000 on personal expenses and $502,000 on gambling.

The intensified efforts to enforce tax compliance are aimed at reducing the tax gap, which is the difference between the amount of taxes owed and the amount actually collected by the IRS. The latest estimates indicate that $688 billion went uncollected for the 2021 tax year.

New Audits of Large Corporations The IRS plans to focus on audits of large corporations that are not paying their owed taxes. The IRS will target U.S. subsidiaries of foreign companies that distribute goods in the United States but do not pay their required taxes on the profits earned. About 150 subsidiary companies will start receiving compliance notifications next month to remind them of their tax obligations in the U.S. and encourage them to rectify their situations.

Starting in early 2024, new IRS accountants will begin conducting 60 audits of the largest corporate taxpayers. These accountants will use a combination of artificial intelligence and specialized knowledge to better detect tax evasion. The use of technology is intended to avoid unnecessary taxpayer audits.

IRS Modernization The Inflation Reduction Act, which includes provisions for providing the IRS with $80 billion over 10 years, has allowed the agency to embark on a complete overhaul of its operations. This includes hiring new staff, updating technology, improving taxpayer service, and cracking down on tax fraud.

The additional funding has already helped improve taxpayer service at the IRS. During the 2023 tax filing season, the IRS answered 3 million calls and reduced phone wait times to three minutes, compared to 28 minutes the previous year.

Currently, the IRS is working on its own free tax filing program called Direct File, which will be introduced as a limited pilot program next year.

The IRS also plans to transition all paper tax filings to digital format by 2025, which is expected to reduce document processing times by half and speed up refunds by four weeks.

Republicans have raised concerns that the $80 billion investment in the IRS could lead to increased audits of ordinary Americans. Earlier this year, Republican lawmakers managed to redirect $20 billion of these funds as part of a bipartisan deal to address the debt ceiling issue.

The White House maintains that this reduction will not lead to significant changes in the IRS's operations in the next few years. Representatives of President Joe Biden's administration have also repeatedly stated that taxpayers earning less than $400,000 per year will not see an increase in audits due to the new funding.