A budget-boosted compliance effort by the Internal Revenue Service (IRS) is paying off. The agency announced in July that it has collected more than $1 billion in overdue taxes from high-wealth taxpayers.
The IRS has long sought to address the collection of past-due taxes from high tax bracket taxpayers. Bootstrapped by a budget that left it without sufficient agents or resources, these tax obligations went unaddressed.
IRS Commissioner Danny Werfel put it plainly, “Years of funding declines meant the IRS couldn’t get to money that we knew was owed, but we simply didn’t have the resources or staffing to collect. Funding from the Inflation Reduction Act is reversing a decade-long decline in our compliance work, including increasing our compliance work involving the wealthiest individuals and groups with tax issues.”
Funding from the Inflation Reduction Act allows the agency to pursue targeted audits on wealthy earners who have avoided paying past-due tax debt. This compliance effort was initiated in the autumn of 2023 with a mandate to collect tax debt from taxpayers with over $1 million in income who owed more than $250,000 in legitimate tax debt. This initial effort involved 1,600 cases. The collected monies represent a resolution of 1,200 of those matters as the IRS continues to pursue the remaining cases.
While sometimes portrayed as a cash grab by the U.S. Treasury, this action by the IRS is intended to level the playing field across the board in terms of compliance. While lower-income taxpayers have seen more scrutiny from the IRS in recent years, this was partly because the IRS lacked the resources and specialized agents to pursue complex tax debt from higher-income taxpayers. Added Mr. Werfel, “With this collection activity, the IRS passed an important milestone in our effort to improve compliance and ensure fairness in the tax system. Our increased work in this area means these past-due tax bills from high-end taxpayers are no longer being left on the table, like they were too often in the past.”
The IRS is also targeting high-income taxpayers who have failed to file tax returns. The IRS estimates over 125,000 have neglected to file returns—and pay due taxes—since 2017. Non-filers in this category should watch their mail for compliance letters. If you owe back taxes or have failed to file necessary returns, speak with a tax attorney about your best options for avoiding an IRS action.
Experienced tax defense attorneys represent you on compliance issues or concerns about tax crime or fraud
If concerned about compliance, speak with our tax lawyers about your situation and best options—before you reply to an audit or other correspondence from the IRS. We have offices in Chicago and Cleveland and serve clients throughout the U.S. and abroad. Call 440-250-9709 or contact us online today.
