IRS Announces $1B in Overdue Collections from Wealthy, Praises Funding

TL/DR –

The IRS has collected $1 billion from millionaires who owe back taxes, targeting approximately 1,600 individuals with incomes over $1 million a year and tax debts exceeding $250,000 each. This was achieved through efforts made possible by the Inflation Reduction Act, which increased the IRS budget by roughly $80 billion over 10 years and saw IRS enforcement budget rise by about 70%. Despite this, congressional Republicans have criticized the Act and are seeking a further $2 billion reduction in IRS enforcement funding for the next fiscal year.

IRS Collects $1 Billion in Back Taxes from Millionaires Due to Increased Enforcement Funding

The IRS collected $1 billion in past-due taxes from millionaires, crediting the 2022 Inflation Reduction Act’s increased enforcement funding. The funds collected since last fall targeted 1,600 individuals earning over $1M annually who owed above $250,000 in tax debt.

IRS Commissioner Danny Werfel stated that these enforcement activities were impossible before the Inflation Reduction Act’s new funding. He emphasised the importance of this collection activity in enhancing compliance and fairness in the tax system.

The Inflation Reduction Act boosted the IRS budget by about $80 billion over 10 years, including roughly $45 billion for IRS enforcement, marking approximately a 70% increase, according to the nonpartisan, nonprofit Tax Foundation.

However, congressional Republicans have been contesting this funding, arguing it enables the IRS to unfairly target hardworking Americans. Republicans negotiated a $20 billion cut to the IRS funding last year and are seeking an additional $2 billion reduction next fiscal year.

Alex Muresianu, a senior policy analyst at the Tax Foundation, believes the IRS announcement is a PR move to prevent further funding reductions. He argues that while the revenue collected is significant, it’s a small part of the total tax revenue and doesn’t indicate definite success of the increased enforcement funding.

Muresianu explained that the process of collecting back taxes often takes years, and the IRS’s announcement only pertains to high-wealth taxpayers. He cautioned against early judgement since a comprehensive data picture requires time.

An updated projection from the Congressional Budget Office estimates $2 billion in gross revenue in 2023, $5 billion in 2024, and about $30 billion per year by 2030. However, Muresianu warns that this isn’t a structural fix, especially considering trillion-dollar deficits.

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