In a bold move to collect millions of dollars in back taxes, the Internal Revenue Service (IRS) has set its sights on 1,600 millionaires and 75 large business partnerships that collectively owe hundreds of millions of dollars in overdue taxes.
IRS Commissioner Daniel Werfel announced this ambitious effort, which will leverage increased federal funding and cutting-edge artificial intelligence tools to identify and pursue wealthy individuals and businesses who have evaded their tax responsibilities.
The IRS’s determination to address tax evasion within the highest income brackets reflects a broader commitment to ensuring tax fairness and compliance, with a particular focus on individuals and entities who have allegedly “cut corners” on their tax obligations.
This initiative, dubbed “compliance efforts,” aims to rectify this disparity and uphold the principle that all taxpayers, regardless of their income level, should fulfill their fiscal responsibilities.
Commissioner Werfel emphasized the IRS’s readiness to tackle this challenge head-on, thanks to a substantial hiring effort and the implementation of advanced AI research tools developed by IRS personnel and contractors.
These innovations have revolutionized the agency’s ability to detect tax evasion patterns and trends, instilling a higher level of confidence in targeting large partnerships that may be concealing income.
Notably, this enforcement campaign follows a successful pilot phase in which the IRS collected $38 million in delinquent taxes from over 175 high-income taxpayers within a few months. Building on this achievement, the agency is poised to significantly expand its efforts in the coming fiscal year.
“We are committed to addressing tax evasion at all levels, and this includes the high-end collection cases,” Commissioner Werfel affirmed. To achieve this, the IRS plans to allocate substantial resources, including dozens of revenue officers dedicated to these cases in fiscal year 2024.
It is no secret that tax evasion remains a pervasive issue among the top echelons of U.S. income earners. A study conducted in 2021 by a team of academic economists and IRS researchers revealed that the top 1% of income earners in the United States fail to report more than 20% of their earnings to the IRS. This alarming statistic underscores the urgency of the IRS’s new tax collection initiative.
The IRS’s renewed commitment to tax collection in this segment of the population is set to commence in October. However, Commissioner Werfel emphasized that additional hiring and resource allocation will be necessary to achieve the campaign’s objectives. “It’s going to be a very busy fall for us,” he acknowledged.
The IRS’s decision to pursue high-net-worth individuals has sparked some concerns and criticisms. Grover Norquist, who leads the conservative organization Americans for Tax Reform, raised apprehensions that the IRS’s expanded power and resources could potentially lead to audits of middle-income Americans down the line. He cautioned that this could evolve into a situation where the IRS targets individuals for political purposes.
In response to these concerns, Senate Finance Committee Chair Ron Wyden (D-Ore.) lauded the IRS’s new approach as a “big deal” that represents a fresh strategy for combating sophisticated tax evasion. “This action goes to the heart of Democrats’ effort to ensure the wealthiest are paying their fair share,” he affirmed in a statement.
While the consensus is that all businesses and individuals should fulfill their tax obligations, some worry about the scale of IRS intervention. David Williams, a representative of the right-leaning nonprofit Taxpayers Protection Alliance, expressed the hope that the IRS’s actions wouldn’t lead to mass audits of Americans.
He argued that every entity and person should pay their taxes but cautioned against a potential overreach by the IRS.
The IRS’s enhanced ability to identify tax delinquents was bolstered by the Inflation Reduction Act, signed into law by President Joe Biden in August 2022. This legislation provided the IRS with access to substantial resources, with an earmarked $80 billion infusion. Nevertheless, this funding is not immune to potential cutbacks by Congress.
House Republicans introduced a $1.4 billion reduction to the IRS’s budget in the debt ceiling and budget cuts package passed earlier in the year. Furthermore, there was a separate agreement to redirect $20 billion from the IRS to non-defense programs over the next two years.
These developments underscore the precarious financial situation of the agency, with the potential for additional cuts looming as a government shutdown dispute unfolds.
In summary, the IRS’s ambitious plan to target wealthy tax evaders marks a significant step in its commitment to tax compliance and fairness. With increased funding and AI-powered tools at their disposal, the IRS is poised to take on the complex challenge of identifying and pursuing those who have allegedly evaded their tax responsibilities.
While concerns about potential overreach exist, the IRS’s actions reflect a broader effort to ensure that all taxpayers, regardless of their income level, contribute their fair share to the nation’s finances. As the campaign unfolds, it remains to be seen how successful the IRS will be in collecting the millions of dollars in back taxes owed by these high-income individuals and large business partnerships.