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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowThe IRS announced on Friday it is launching an effort to aggressively pursue 1,600 millionaires and 75 large business partnerships that owe hundreds of millions of dollars in past due taxes.
IRS Commissioner Daniel Werfel said that with a boost in federal funding and the help of artificial intelligence tools, the agency has new means of targeting wealthy people who have “cut corners” on their taxes.
“If you pay your taxes on time it should be particularly frustrating when you see that wealthy filers are not,” Werfel told reporters in a call previewing the announcement. He said 1,600 millionaires who owe at least $250,000 each in back taxes and 75 large business partnerships that have assets of roughly $10 billion on average are targeted for the new “compliance efforts.”
Werfel said a massive hiring effort and AI research tools developed by IRS employees and contractors are playing a big role in identifying wealthy tax dodgers. The agency is making an effort to showcase positive results from its burst of new funding under President Joe Biden’s Democratic administration as Republicans in Congress look to claw back some of that money.
“New tools are helping us see patterns and trends that we could not see before, and as a result, we have higher confidence on where to look and find where large partnerships are shielding income,” he said.
A team of academic economists and IRS researchers in 2021 found 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 effort will begin as soon as October.
“We have more hiring to do,” Werfel said. “It’s going to be a very busy fall for us.”
The federal tax collector gained the enhanced ability to identify tax delinquents with resources provided by the Inflation Reduction Act, which Biden signed into law in August of 2022. The agency was in line for an $80 billion infusion under the law, but that money is vulnerable to potential cutbacks by Congress.
House Republicans built a $1.4 billion reduction to the IRS into the debt ceiling and budget cuts package passed by Congress this summer. The White House said the debt deal also has a separate agreement to take $20 billion from the IRS over the next two years and divert that money to other non-defense programs.
With the threat of a government shutdown looming in a dispute over spending levels, there is the potential for additional cuts to the agency.
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So, it takes $80 billion in new money to chase $400 million of old money, plus parts of the $10 billion of partnerships? Seems like a major lost effort.
The IRS is going to get $80billion over the next 10 years. They haven’t gotten it all yet. I little common sense will tell you that you can’t ramp up everywhere all at once. It’s estimated that for every dollar invested in the IRS, tax collection will increase by $5 to $9. So yeah, it is a good investment, and this new program is just the low hanging fruit. Like the article suggests, the next target will be all of the top 1% that underreport income by up to 20%.
Kevin, you lack knowledge about our tax collection system. History shows that for each $1 added to IRS enforcement, the government collects an additional $8 in taxes. So it is wise to “beef up” IRS enforcement and make sure those at the top of our economic food chain are doing/paying their part, just as the folks at the bottom of the food chain faithfully pay their taxes. The final total will be much more than $400MM in a single year.
How soon people forget 2 hour wait times and the 80% abandon call rate when trying to call the IRS under the Trump administration.
Defund the tax police is the Republican model. With a skeleton crew, only the people that have all of their income reported on 1099’s were caught by the automated programs and when there was a mistake, you couldn’t get hold of anybody to understand why or even fix it. An underfunded IRS could only harass the little guy and ignore all of the big dollar tax cheats.