U.S. taxpayers with more than $1 million incomes and owing more than $250,000 in taxes will be stringently scrutinized under a new collection initiative announced Friday by the Internal Revenue Service.
The IRS will contact about 1,600 taxpayers in this category who owe hundreds of millions of dollars in taxes, according to an agency statement.
“By the end of the month, the IRS will open examinations of 75 of the largest partnerships in the U.S. that … each have more than $10 billion in assets,” an agency spokesperson stated.
The new initiative is funded by the Inflation Reduction Act, which allocated billions to the IRS, according to a CBS News report.
A portion of the funds appropriated for IRS use will be used for identifying millionaire tax evaders. The IRS plans to deploy “dozens of revenue officers” in fiscal year 2024 to focus on high-value collection cases.
The Inflation Reduction Act of 2022 allocated $80 billion to the IRS. More than half of that amount is designated for hiring more enforcement agents.
The overarching goal is to enhance tax revenue by identifying wealthy individuals who either underreport or conceal their income.
Such evasion strategies, due to their legal intricacies and associated costs, are less prevalent among the average taxpayer, as their earnings are typically reported to the IRS through standard tax forms like W2s.
“If you pay your taxes on time it should be particularly frustrating when you see that wealthy filers are not,” IRS Commissioner Danny Werfel said in a conference call with reporters.
While the IRS is ramping up its efforts on the wealthy, it emphasized that individuals earning below $400,000 annually will not see an increase in audit rates.
This clarification comes amid concerns from some Republican lawmakers and policy experts who feared that the additional IRS funding might target middle-income earners.
The past decade witnessed a 50% surge in individuals with incomes over $1 million but audits for such high-income tax returns decreased by two-thirds, the report noted.
“The years of underfunding that predated the Inflation Reduction Act led to the lowest audit rate of wealthy filers in our history,” Werfel remarked.
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