The Internal Revenue Service (IRS) is launching a historic crackdown on tax cheaters, with a specific focus on millionaires who owe large sums of money in unpaid taxes. This effort, which the agency refers to as a sweeping, historic effort to restore fairness in tax compliance, aims to address gaps in tax compliance that have grown over the past decade.
Using federal funding provided by the Inflation Reduction Act, the IRS plans to target individuals with at least $250,000 in back taxes, as well as large business partnerships with an average asset value of $10 billion. This includes hedge funds, real estate investment partnerships, major law firms, and other industries. The crackdown will also aim to tackle promoters who are abusing the nation’s tax laws.
IRS Commissioner Danny Werfel emphasized the agency’s critical role in collecting funds for important government initiatives, such as maintaining safety in various sectors. He stated that the IRS will increase its compliance efforts on those who pose the greatest risk to the tax system, whether it’s wealthy individuals seeking to evade their fair share or promoters involved in abusive schemes. Werfel believes that these steps are essential for the future of the nation’s tax system.
To support this crackdown, the IRS is undergoing significant changes, including a substantial hiring spree and the implementation of artificial intelligence (AI) and machine learning tools. These tools will enhance the agency’s ability to identify where high-income individuals are shielding their income.
The push for compliance is set to begin in October, following a successful crackdown earlier this year that resulted in the collection of $38 million in delinquent taxes from more than 175 high-income taxpayers. The IRS now plans to scale up its efforts.
The IRS’s announcement has garnered support from certain parties, such as Congressman Bill Pascrell, who commended the agency’s actions in cracking down on tax cheats. Additionally, Americans for Tax Fairness expressed their approval, highlighting the positive impact of adequately funding the IRS to catch wealthy tax evaders.
However, there remains a dispute among politicians regarding how to fund such a monumental task. House Republicans, in particular, are not pleased with the infusion of cash into the IRS, especially after this year’s U.S. debt ceiling drama. President Biden has rescinded over $20 billion of IRS funding to reach a bipartisan consensus on suspending the country’s debt limit until January 2025.
Despite financial challenges, the IRS is determined to reverse the trend of underfunding and understaffing that has plagued the agency for the past decade. Commissioner Werfel remains committed to ensuring that the new funding will lead to more effective compliance efforts targeting the wealthy while maintaining historically low audit rates for middle- and low-income filers.
In conclusion, the IRS’s historic crackdown on tax cheaters, particularly among millionaires, is set to begin in October. With the infusion of federal funding and the use of advanced technologies, the agency aims to restore fairness in tax compliance and address gaps that have grown over the years. Although some politicians have concerns about funding, the IRS is confident in its ability to turn the tide and enforce tax compliance effectively.