IRS crackdown on wealthy nets millions in back taxes
The IRS has announced that it has collected $122 million in back taxes from 100 cases involving millionaires who were significantly behind on their payments, bringing the total recent collection from wealthy households to $160 million. This comes after a tax and climate package enacted last summer earmarked billions for the IRS to overhaul its operations and toughen enforcement against super-rich taxpayers and major businesses. Moving forward, the IRS plans to initiate 60 audits on major corporations next year and send out approximately 150 alerts to U.S.-based subsidiaries of foreign companies to ensure they are reporting the full amount of income they generate in the U.S.
IRS Recovers $160 Million From High-End Tax Evaders
The IRS has collected $160 million from tax cheats through tougher enforcement measures, including $122 million from a recently announced crackdown on 1,600 millionaires who were significantly behind on their taxes. This figure also includes $38 million in back taxes previously collected.
“The funds we’ve collected reveal the tremendous amount of money potentially recoverable,” said IRS Commissioner Danny Werfel. This successful collection effort follows the implementation of the Inflation Reduction Act, which earmarked billions for the IRS to intensify enforcement against super-rich taxpayers and major businesses.
Some of the recouped funds resulted from restitution or guilty pleas in criminal cases. One case involved a $15 million restitution order for a person who falsely claimed personal expenses for the construction of a lavish mansion were deductible business expenses. Another tax cheat, who skimmed over $670,000 from a business via a false tax return, allegedly spent $502,000 on gambling.
There was a $688 billion gap between taxes owed and actual tax payments in 2021 based on recent IRS estimates. The revenue agency is also targeting corporate tax dollars as part of its tax enforcement strategy.
Future Plans for IRS Tax Enforcement
Next year, the IRS plans to initiate 60 audits on major corporations with an average of $24 billion in assets and a yearly taxable income averaging $526 million. Starting next month, the IRS will send approximately 150 alerts to U.S.-based subsidiaries of foreign companies, reminding them of their U.S. tax obligations. This initiative aims to encourage self-correction among taxpayers.
These alerts follow recent IRS plans to conduct 75 audits at large partnerships, including law firms and hedge funds. The Inflation Reduction Act, passed last summer, allocated $80 billion to the IRS over the next 10 years. However, this amount was reduced to $60 billion following White House debt ceiling negotiations.
Werfel’s update comes amid potential government shutdown next month and a vacant Speaker position in the House of Representatives. He emphasized that the IRS challenges are magnified by budget uncertainty.
For further reading, check out The IRS is auditing the rich. How can you fly under the radar if you’re not wealthy?
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