The Internal Revenue Service (IRS) is intensifying its efforts to combat tax evasion among high-earning individuals, following recent upgrades to its enforcement and operations. According to Commissioner Danny Werfel, the IRS has successfully resolved approximately 175 cases of tax delinquency involving millionaires in recent months. These individuals collectively owed substantial tax debts totaling $38 million.
Werfel emphasized that these individuals were simply wealthy taxpayers who failed to meet their tax obligations. However, this is only the beginning of the IRS’s crackdown on delinquent millionaires. Through the implementation of the Inflation Reduction Act, the agency aims to strengthen its enforcement capabilities and further pursue wealthy taxpayers who have evaded their tax responsibilities.
Werfel revealed that the IRS is also turning its attention to wealthy households falsely claiming residency in Puerto Rico to exploit tax benefits without actually residing there. Additionally, the agency is working to identify affluent taxpayers who may be misusing the treaty agreements between the United States and Malta to illegitimately claim exemptions.
Highlighting the IRS’s commitment to holding high-wealth filers accountable, Werfel stated, “The IRS of today is laser-focused on ensuring that our wealthiest taxpayers, including millionaires and billionaires, fulfill their tax obligations.” Recent reports from a watchdog organization indicate that audit rates have declined across all income levels in recent years, with particularly noticeable reductions for high-earning individuals.
According to former IRS Commissioner Charles Rettig, there exists a significant tax gap amounting to as much as $1 trillion annually—a discrepancy between taxes owed and taxes paid. As part of the solution, the Inflation Reduction Act, enacted in August of last year, allocates $80 billion over the course of 10 years to bolster the IRS’s efforts in auditing wealthy individuals and corporations. Furthermore, the Biden administration has assured that individuals earning less than $400,000 will not experience heightened audit rates compared to previous years.
The allocation of funds to the Internal Revenue Service (IRS) has been a topic of contention between Democrats and Republicans. While Democrats argue for the necessity of sufficient funding for tax administration and enforcement, Republicans criticize the amount allocated, considering it wasteful.
Reduction in Allocation and Redistribution
In late May, a legislative deal resulted in the immediate retraction of $1.4 billion from the original $80 billion sum. Additionally, $20 billion is set to be redirected towards other areas of expenditure.
Ongoing Battle for IRS Funding
The discussion surrounding IRS funding continues, with a House appropriations bill proposing an allocation of $11.2 billion to the agency for fiscal-year 2023. Although this figure is $1 billion less than the previous year’s enacted level, there are indications that the funds are being put to good use.
Enhancements in Customer Service and Online Capabilities
IRS Commissioner Werfel emphasizes that the allocated funds have already led to improvements in customer service and the agency’s ability to address tax-related issues online and through mobile devices. Initiatives such as a pilot project for direct filing of income taxes with the IRS are also being considered, potentially bypassing the need for paid preparers or tax software.
Safeguarding Against Conflict of Interest
The House appropriations bill includes a provision that prevents the IRS from using funds to establish a government-run tax filing service without congressional approval. This measure aims to avoid conflicts of interest where the IRS, as the tax collector, also becomes involved in tax preparation. The bill summary justifies this move as safeguarding the integrity and independence of the IRS.
Maintaining IRS Funding for Effective Tax Administration
While critics advocate for scaling back IRS funding, Commissioner Werfel argues against it. He believes that reducing funding would lead to diminished accountability for wealthy individuals who owe taxes without paying and hinder the IRS’s ability to assist taxpayers in navigating the increasingly complex tax code.
In conclusion, the debate over IRS funding continues, with Democrats supporting adequate funding for effective tax administration, while Republicans express concerns about the amount allocated. The results of this ongoing discussion will have implications for the IRS’s ability to carry out its responsibilities and serve the American taxpayer.