IRS collects milestone $1 billion in back taxes from high-wealth taxpayers
WASHINGTON — The IRS announced Thursday that it has collected $1 billion in back taxes from high-net-worth tax evaders, a milestone intended to show how the agency is using money it received as part of the Biden administration’s signature campaign. climate, health care and tax package signed in 2022.
Part of the push to raise public awareness of tax collection for the wealthy is a growing recognition by agency officials that a potential Republican takeover of the White House and Congress could mean massive future cuts to the IRS budget. Showing the public how much work the IRS does is meant to make the much-maligned agency more likable.
As part of that effort, the IRS last year launched a series of initiatives aimed at pursuing wealthy individuals who have not paid their tax debts. The IRS says the campaign is aimed at taxpayers with more than $1 million in income and more than $250,000 in recognized tax debts.
“President Biden’s Inflation Reduction Act expands tax fairness and ensures that all wealthy taxpayers pay the taxes they owe, just like working families,” Treasury Secretary Janet Yellen said in a statement.
In June, the Treasury Department proposed a rule and guidance that outlines plans to essentially end “partnership basis shifting” — a process by which a company or individual can move assets between a series of related parties to avoid paying taxes. That could generate more than $50 billion in revenue over the next decade, the Treasury Department said.
Other initiatives announced over the past year include pursuing people and companies that wrongly deducting personal flights on business aircraft and the collection of outstanding taxes from criminal millionaires.
Eugene Steuerle, a fellow and co-founder of the Urban-Brookings Tax Policy Center, said that if the IRS “can show that they are having a positive impact and that it is not affecting the average American taxpayer, there would be more public support for this activity and the agency.”
“Any increase in government investigations looks like an intrusion,” Steuerle said, adding that if the IRS can show taxpayers how it conducts its investigations, the broader public could become less fearful of an audit.
Meanwhile, Republicans have threatened a series of cuts to the IRS, sometimes successfully.
House Republicans built a $1.4 billion cut to the IRS into the debt ceiling and spending cuts passed by Congress in the summer of 2023. The deal included a separate agreement to cut $20 billion from the IRS over the next two years and redirect that money to other non-defense programs.
The House Republican proposal for fiscal year 2025 will come out of the Subcommittee on Financial Services and General Government in June proposes further cuts to the IRS in 2025and would cut funding for the Direct File program, which is being expanded to allow Americans to file their tax returns directly with the IRS.
According to Demian Brady, vice president of research for the National Taxpayers Union Foundation, the IRS continues to target non-wealthy partnerships for audits.
“It should also be noted that nearly two-thirds of the audits initiated in 2023 involved people making less than $200,000,” Brady said.