The Internal Revenue Service has issued an update on its enforcement efforts, announcing that it has collected more than $1 billion in unpaid taxes from millionaires, with payments from more than 1,200 individuals, over the past year. The ongoing initiatives are funded by the Biden-era Inflation Reduction Act, aimed at increasing the collection of tax debt from some of the wealthiest Americans.

As part of the larger effort, 1,600 individuals whose income was more than $1 million a year and who each owed the IRS more than $250,000 in known tax debt were targeted.

According to IRS Commissioner Danny Werfel, these efforts are only made possible by tens of billions of dollars in funding provided by the legislation, as the agency previously did not have the staff or resources to pursue these high net worth taxpayers despite being aware that they owe taxes. “The cumulative results achieved in less than a year reveal the magnitude of what can be achieved over the long term as our implementation of Inflation Reduction continues to grow in the months ahead,” Werfel added in the latest news release. IRS.

Closing the gap

In addition to increased auditing of wealthy individual taxpayers, the agency is also focused on corporations and complex business partnerships, particularly those that manipulate the Internal Revenue Code. Just last month, she announced another initiative that could bring in about $50 billion over the next 10 years by closing a tax loophole used by some business partnerships to avoid paying taxes. These efforts have focused on targeting a practice known as “basis-shifting transactions,” also known as “covered transactions,” which have no essential purpose other than moving money from one property to another to maximize discounts. tax and to minimize the tax liability.

IRS issued new guidelines and regulations to assist with this effort, including Revenue Ruling 2024-14, which “will support the IRS's position in current and future audits and litigation that many of these transactions violate the codified economic substance doctrine because the transaction does not creates no significant difference in the economics of the parties as compared to the tax benefit or has no significant business purpose, and proposed regulations “that would require taxpayers and their material advisers to report whether they and their clients are participating in these abusive transactions that vary on a partnership basis”. Certain aspects of the guidance may be applied retroactively and may affect transactions that occurred in prior years.

In a statement announcing the new guidance, the Treasury estimates a gap of $160 billion between what the top 1% of earners are likely to owe in tax and what they pay.

Also on her priority list are the wealthy elite who fly privately. The IRS is increasing controls on corporate jet use, aiming to crack down on personal travel claimed as business tax deductions (the Internal Revenue Code only allows deductions for business use).

Supporting success

With the presidential election fast approaching, the agency seems motivated to prove that Democratic-backed funding efforts are paying off; in February, it released a report that showed the agency could increase revenue by as much as $561 billion over the next 10 years thanks largely to money made available to hire more staff and upgrade the agency's archaic technology systems ( for example, using artificial intelligence to identify taxpayers who are not paying their tax bills).